A landmark decision made by the Ombud for the Financial Service Providers has ruled against Nedbank Group Insurance Brokers for forcing the homeowner to insure via Nedbank.
In short Helena Dennis of Cape Town took a R400 000 home loan with Nedbank in March and complained to the FAIS Ombud when Nedbank refused to accept an existing homeowner’s insurance policy that she had with Santam. Dennis objected to Nedbank’s policy for various reasons, including the fact that the excess she would have to pay under the policy, in the event of a claim, was higher than the excess under her Santam policy. Nedbank stated that they were entitled to impose their own homeowner’s cover on Dennis in terms of the Section 43 (5) (a) of the Short Term Insurance Act. The Ombud, Charles Pillai refuted this and went on record to state that the Financial Advisory and Intermediaries Act (FAIS) prevails when any other law regulating market conduct in rendering of financial services is inconsistent or in conflict with the FAIS Act.
The following conflicts exist:
- In terms of the FAIS Act you must be able to make informed decisions when receiving financial services. Implicit in the concept of an informed decision is the right to choose.
- The General Code of Conduct under the FAIS Act requires financial service providers to render services “honestly, fairly, with due skill, care and diligence and in the interests of the client and the integrity of the financial services industry”
- The General Code also requires a financial services provider to disclose any personal interest in the financial service being provided.
Nedbank ran foul of the law by simply effecting Homeowner’s cover over a property without consulting the consumer. Moreover, Nedbank and Nedbank Group Insurance Brokers are part of one group, namely Nedbank Limited. This “personal interest” was only disclosed to the consumer by Nedbank in a disclosure document provided months after the policy was put in place.
In summary, the good news for the consumer is that you are now free to use an insurance company of your choice when taking out short term insurance on your property that is bonded to a bank.
The content of this article is based on extracts from the Weekend Argus Personal Finance 2005. The full version is available on request.
The trigger for the cover is an accident (as opposed to illness) and the compensation is based on the sum insured you select on Death, Permanent Disability, Temporary Disability, and Medical Expenses. Medicals are not required and age acceptance limits…