Broker who failed to act on instructions has to cough up R256,800

In this case, the client’s car was involved in an accident on 23 June 2022. The claim was registered on 27 June, and the broker said it was then notified “for the first time” by the insurer that two payments had been missed, resulting in the claim being declined.

It turned out that the client had switched bank accounts and on 19 May he sent the broker a WhatsApp message asking the broker to update his bank details with the insurer. There were other instructions in the same message, which the broker acted on. However, the broker said he “did not see” the message about the change of banking details.

The result was that two premiums were declined on 1 June and 1 July.

When you miss an insurance premium payment you have a grace period of 15 days to pay the outstanding amount. In its ruling the ombud noted that this grace period only applies from the second month of the policy. “However, the way in which you make up the outstanding premium differs between insurers, so always contact the specific insurer to confirm how payment is to be made,” the ombud said.

The broker tried to argue that he had not received notification of missed payments from the insurer, so the insurer was liable for the miscommunication. “The very nature of the (broker’s) work is that he is entrusted with the financial well-being of (clients). It was confirmed that all the other changes communicated to the (broker) via WhatsApp had been actioned, which confirms that the instruction had been received but not actioned. In addition, the client mandates a financial services provider and/or its representatives to carry out specific instructions. In this agreement, it is required of the (broker or financial services provider) to exercise reasonably the required due care and skill,” the ombud said.

The ombud found that the failure to pay the claim was the fault of the broker and due to his “shortcomings in the financial service rendered” he was ordered to resolve the issue with the client. The broker agreed to settle the loss of R256,800.

“While this case study resulted in a positive outcome for the complainant, there are many complaints where we are unable to assist due to the complainant having failed to make payment as required. Even though the Policyholder Protection Rule provides that a client must be notified of the missed premiums, you as the client must make a habit of ensuring that your premium payments are maintained and up to date to enjoy the benefits provided by the policy,” the ombud said.

The ombud also noted that you can submit a valid claim during the grace period (after one missed payment), but some policies might still require that the premium is received within the grace period for the claim to be valid. Your insurer can also choose to reduce the amount of a valid claim submitted during the grace period by the amount of your unpaid premium. DM