November 15, 2008
By Neesa Moodley-Isaacs.
The financial services ombud has ordered an insurance broker to compensate the owner of a trucking company because the broker's failure to submit completed insurance application forms to the underwriter left the owner out of pocket after an accident.
Your broker has a duty to exercise care and diligence when dealing with your insurance and if he or she fails to do so, Charles Pillai, the Ombud for Financial Services Providers, will take action.
This week, Pillai ordered APBCO Versekeringsmakelaars in Cape Town to pay a client R133 200 as compensation for the loss of a truck after its broker failed to ensure that insurance application forms were filled in and submitted timeously.
Sidney Mannie of Liberty Transport contacted Renee McKeown of APBCO on August 24, 2006 and requested that his trucks and trailers be insured immediately.
According to Mannie, McKeown confirmed on the same day that insurance had been taken out with Heavy Commercial Vehicle Underwriting Managers (HCV).
On August 31, 2006, one of Mannie's trucks was involved in an accident. McKeown met Mannie the following day and it was only then that the insurance application forms were completed.
McKeown once again confirmed that the truck involved in the accident had been insured.
However, HCV declined Mannie's insurance claim. It said the truck had not been insured at the time of the accident, because HCV had not received fully completed insurance proposal and debit order authorisation forms from the broker.
APBCO director JJ de Witt told Pillai that Mannie was partly to blame for the truck not being insured, because Mannie had repeatedly not made himself available to sign the forms.
De Witt said HCV had agreed to temporary cover for the vehicles.
He also alleged that McKeown had left a proposal form at a dealership for Mannie to sign but that Mannie had not arrived as agreed.
'No effort made'
Mannie maintained he was not at any time told that cover was subject to the completion of a proposal form, nor had McKeown made any attempt between August 24 and the accident on August 31 to ensure that the proposal form was filled in.
Mannie said McKeown had made two appointments to meet him so that the application forms could be filled in, but she had cancelled both appointments.
On further investigation, Pillai found the following:
APBCO had dealt with HCV since 2002 and in that time none of its clients had been granted insurance without having completed proposal and debit order forms in full;
Only four hours before the accident, HCV had in an email to APBCO reiterated that Mannie "was not on cover" until HCV received all the outstanding documentation; and
It was standard practice for HCV to issue insurance only on receipt of fully completed proposal and debit order forms.
HCV received the required documentation on September 4, 2006, which was 11 days after the request for cover had been made and four days after the truck accident.
Pillai said there was no evidence that Mannie had not made himself available to sign the application forms, nor was there any reason to believe that HCV would have agreed to temporary cover in this instance when it was not its policy to do so.
"Not ensuring that written confirmation was provided in respect of Mannie's insurance cover is clearly a contravention of the [Financial Advisory and Intermediary Services] Act," the ombud said.
Pillai says it was incumbent on APBCO to ensure that the proposal and debit order forms were completed and submitted timeously to HCV so that insurance could have been secured.
He says it is clear that APBCO had acted negligently, resulting in the repudiation of Mannie's claim.
Fraud incidents sink bid to have licence rejection overturned
A Pietermaritzburg financial adviser, Coleen Blessie of Financial Solutions, found out that the Financial Services Board (FSB) means business when it comes to ensuring that financial services providers (FSPs) are "fit and proper" before they are granted a licence to give you financial advice.
Blessie appealed to the FSB's appeal board in October 2007 after the FSB in December 2006 turned down her application for an FSP licence. Blessie had been practising as a medical schemes broker since March 2000.
During 2003, Blessie hired Hlengiwe Mchunu to act as her representative. While Mchunu was waiting to be assigned a broker code, Blessie allowed her to provide advisory services using Blessie's broker code. Mchunu was paid a commission for the policies she sold.
Blessie later fired Mchunu because she allegedly forged signatures and fraudulently applied for two clients to become members of Discovery Health. Blessie reimbursed the clients.
Discovery cancelled Blessie's contract to market its products because she had allowed Mchunu to use her broker code.
The FSB rejected Blessie's licence application because her failure to report the fraud incidents to the FSB meant she did not meet the "fit and proper" requirements.
In rejecting Blessie's appeal, the FSB appeal board says:
Blessie should have carried out a thorough check on Mchunu before employing her and should have supervised her activities; and
The fact that Blessie reimbursed the alleged fraud victims and did not report Mchunu's conduct to the relevant authorities amounted to her defeating the ends of justice or becoming an accessory after the fact.
The appeal was dismissed with costs.
  
 
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