An insurer who refused to pay the claim of R277 500 on a policy that was intended to settle the balance on a mortgage bond has been ordered to do so by the Ombudsman for Long-term Insurance, Judge Ron McLaren.
The complainant and her husband obtained two policies from Nedgroup Life Assurance Company Limited to cover the outstanding balance of a bond over a property in the event of death or disability.
The complainant’s husband passed away during 2015 and she claimed the insured amounts under both policies. The insurer settled the outstanding bond balance in terms of policy Number 315 (sum assured R280 000) and declined the claim under policy Number 601(sum assured R277 500) on the basis of an exclusion clause which states: “No benefit will be payable after repayment/cancellation of bond.”
The insurer said: ”…it was a duplicate policy and on payment of the claim on policy Number 315, the outstanding balance on the Nedbank account was settled in full. All premiums in respect of this policy were refunded on 10 June 2015.”
The complainant’s response was that she and her late husband had paid the premiums under both policies for many years and that the insurer should have picked up that there were two policies in existence to cover the one bond. As it turned out, the insurer only implemented a system to prevent “duplicate policies” in 2016, nine years after the commencement of the policies.
The complaint was considered at an Adjudicators’ meeting at which the following factors were considered:
• the policyholder received regular annual benefit statements advising him that the sums assured were R280 000 and R275 000;
• premiums were duly paid and it was reasonable of the policyholder and his wife to have a legitimate expectation that the policies they paid for every month would pay out in the event of his death; and
• the policies were not decreasing term policies, i.e. that regardless of the outstanding balance reducing, the set-out sums assured stayed the same. The policies would not merely settle the outstanding bond balance, but a further amount (the sum assured less outstanding bond balance) would appear to be payable. This lends further credence to the complainant’s submission that she expected to receive a set amount of money.
The meeting was of the view that the payment under policy Number 315 extinguished the outstanding balance on the loan and it made a provisional ruling that the amount of R277 500 (the sum assured under policy Number 601) should be paid to the complainant.
The insurer challenged the provisional ruling and reiterated: “The claim payment done by Nedbank Insurance under policy Number 315 repaid the bond account in full and as per the terms of Loan Protection Policy Number 601, no benefit was payable.”
A second Adjudicators’ meeting was held and took into consideration that for several years, premiums were paid on time without fail. Whilst the insurer was of the view that the complainant and her late husband should have read the policy documents upon receipt, there was no provision in either policy that prohibited holding more than one policy on the same mortgage loan.
The meeting could further find no indication on any of the annual communication sent by the insurer to the deceased, that holding two policies might be problematic. It is further not unusual to hold more than one policy with a particular insurer.
The meeting was of the view that the correct conclusion was reached in the provisional determination and confirmed same.
The final determination was that the insurer should pay the sum assured of R277 500 in terms of policy Number 601.