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Consumers fight back against Momentum - and win


Consumers fight back against Momentum - and win

Insurer backs down after public outcry, decides to pay hijack victim's wife in full - even though it didn't have to

Consumer journalist

"No we will not pay out, I think we need to stick to our policy... we need to protect the integrity of our industry.”
With those words, Hillie Meyer, CEO of MMI, the holding company of Momentum, ended his interview with 702 talk show host Eusebius McKaiser on Monday morning.
They’d been discussing the insurance company's controversial rejection of the claim on Durban hijack victim Nathan Ganas’ life policy, on the grounds that he’d failed to disclose to them, when he took out the policy in 2014, that he’d had a blood sugar test two weeks earlier.
By Tuesday afternoon, public outrage over the perceived injustice had reached fever pitch. "The man did not die of dishonesty,” McKaiser said, "he died in a hail of bullets! That’s the only relevant fact when it comes to paying out!”
Then came Momentum’s surprise about-turn.
“We have taken the criticism to heart... creating a solution that will pay an amount equal to the death benefit – limited to a maximum of R3million – in the case of violent crime, regardless of previous medical history,” the company announced on its social media accounts.
"This will apply to all existing as well as future life cover clients, fully funded from Momentum’s profits and not from our clients’ premiums, and applies even when material medical non-disclosure impacts the legitimacy of the contract.
“It’s not in addition to the normal death benefit; it only applies in circumstances when the death benefit will not be payable or has been reduced.”
Best of all, the decision applies retrospectively. So Ganas’ widow Denise and many others whose loved ones died during acts of crime, and then had their claims rejected due to material medical non-disclosure, will be getting the good news. “We are identifying clients who were impacted in this way and we will contact their families to arrange payment,” Momentum said.
The change of heart has been hailed as proof of the power of social media.
“Citizen pressure + social media = change,” tweeted Leigh-Anne Aitken, as the news broke.
Until that point, it appears that only those in the insurance industry had believed that Momentum’s rejection of the Ganas claim was justified.
In that MacKaiser interview, Meyer had said Momentum's refusal to pay the Ganas claim was "just our normal, standard practice".
“When is it acceptable for a client not to be truthful at the application stage?” he'd asked, saying there could be no grey area when it came to a client’s failure to fully disclose their medical history.
If Momentum paid the claim, he said, “we will be implicitly encouraging non-disclosure”.
As morally indefensible as many thought Momentum’s decision to be, it was legally sound, and the legal minds of the impartial Ombudsman for Long-Term Insurance (OLTI) sided with the company when Denise Ganas lodged a complaint.
The term which has caused confusion in the minds of those not familiar with the insurance industry’s “normal, standard practices” is “material non-disclosure”.
It’s assumed that because Ganas’ blood sugar test results had absolutely nothing to do with the way he died, his non-disclosure of those tests was “not material”.
But that’s not what it means, as deputy OLTI Jennifer Preiss explained to me last year, when a similar case hit the headlines.
Old Mutual had rejected a claim on the life policy of 32-year-old Brent Kruger – who was gunned down in gang crossfire in Cape Town while dropping his child at school – because of material non-disclosure of a medical condition.
That insurer then did an about-turn, saying that on re-assessing the claim, the non-disclosure “was not material, as initially presented” and the contract was valid, and the claim was paid.
“Material non-disclosure means that a reasonable prudent person would have disclosed the information that was not disclosed,” Preiss said.
“If the non-disclosure is not material, then the insurer cannot repudiate the policy. That's the legal position.”
Momentum has said last year it declined only 0.4% of claims based on non-disclosure of material facts, “and only once we’ve established beyond doubt that there was material non-disclosure of known conditions”.
The Ombud’s office requires insurers to tick another box in order to “fairly” repudiate a policy: “Where there is non-disclosure the insurer has to reconstruct the policy when it becomes aware of the non-disclosure”, Preiss said.
“So, if the insurer still would have issued a policy if it knew the true facts at application stage, albeit on different terms such as a higher premium, then it should do so when it becomes aware of the true facts at any stage, even at claim stage,” she said. In other words, the pay-out amount would be reduced to account for the higher premium which should have been charged to match the risk.
“Only if a policy would not have been issued at all, based on a full medical history at inception – can it be repudiated,” Preiss said. “That is our approach.”
That’s exactly what Momentum claimed in the Ganas case.
It raised a very pertinent question – why don’t life insurers investigate their clients’ medical history when the policies are taken out, rather than only when their beneficiaries make a claim?
Surely that would be more fair and ethical?
Industry insiders point to the administrative and cost burden that would create for insurers.
Clearly they have more of an incentive to invest time and recourses into such an investigation when presented with a claim running into several million Rand.
In it’s “about turn” statement late Tuesday, Momentum continued to stress the importance of "full and honest disclosure” at application stage.
"The only time your health status matters, is when you apply for cover. This is when you need to share all your medical and health information. If your health deteriorates after commencement of the policy, there is no need for you to inform Momentum – your claim will be completely valid if the information provided at the start of the policy was accurate.
Those who have life policies with any insurer, particularly if taken out recently, would do well to source their medical histories to ensure you did not inadvertently leave anything out. Medical schemes are a good place to start.
If so, alert your broker. Your premium may go up slightly, but at least your beneficiaries won’t get a shock when they make a claim.

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