Via various social media platforms, radio talk shows and TV inserts, most of us were not immune to the buzz created by the recent decision made by Momentum to reject a R2.4m life insurance pay-out for a Durban man, due to non-full disclosure of his health condition. Then, after a tidal wave of public pressure, they reversed the decision a short while later.
Let’s just recap the story in a précised version as we investigate what this conundrum means for insurers and claimants going forward.
Although Nathan Ganas died in a hijack from gunshot wounds, the insurance group rejected his policy claim after it was discovered he had high blood sugar levels. It clarified its position, with an emphasis that failure to conduct proper checks would “indirectly encourage the practice of non-disclosure. This will in turn result in a worsening claims experience, which would ultimately increase the premiums for all our clients.”
According to the company, the rejection of the claim was referred to the Ombudsman for Long Term Insurance, who ruled in favour of the insurer. Its refusal to pay out a claim on the basis that its client had lied about an existing medical condition was absolutely correct in terms of the law, but was perhaps a dubious public relations decision.
What Momentum failed to consider is the power of social media, a very intolerant arena when a perceived injustice occurs. Then an abrupt U-turn happened and Momentum paid out. It seems like a decent compromise, as it will apply this retrospectively, meaning Nathan’s wife Denise will get her R2.4m pay-out, less the R50 000 the firm paid out on her husband’s death (and had demanded back initially).
Momentum also added that due to South Africa’s considerably higher than average murder rate, it will pay out claims up to a maximum of R3m if one of its clients is killed unlawfully, even if they lied on their application forms.
So what is the take out from the Momentum conundrum? No claimant or insurer (including Momentum now) wants to go through the intense turmoil the whole debacle caused. The industry accepts that some of its clients will seek to fudge or omit important details in their medical records to secure lower premiums, in the hope that their insurer will not find out at the time of the claim, which is why the industry carries out intensive investigations before making pay-outs.
Let’s all remember that whether it’s health, personal or commercial insurance, the strict requirement for full disclosure is a fundamental principle of insurance, and a breach of this duty, however innocent, obliges the insurer to decline the claim and to deal with the policy as if the non-disclosed information had in fact been disclosed.
In closing, total transparency from the get-go is always king and will help ensure that a swift and seamless claim pay-out is made.