Model Insurance finally faces the music 09 October 2014 Jonathan Faurie Jonathan Faurie, FAnews Journalist Jonathan Faurie, FAnews Journalist It has been over a year since we profiled the fraudulent dealings which were taking place at Model Insurance and we are now finally seeing the first punitive actions taken against the company by the office of the Financial Advisory and Intermediary Services (FAIS) Ombudsman. While there are still many unanswered questions, it is good to see that visible efforts are being made to rid the industry of individuals and companies who knowingly break the law. Phantom premiums The complainant in the FAIS Ombud’s latest determination is Melvin Cresswell who approached Model Insurance (the respondent) to insure his vehicle. On the 22nd of July in 2011, the respondent furnished a policy number together with a policy schedule showing that the policy was accepted by the respondent. On the 9th of August in 2011, the complainant’s vehicle was hijacked. He complied with the letter of the law by reporting the incident to the South African Police Services (SAPS), after which he informed Model Insurance of the incident. By the 1st of September the claim was not settled and the complainant was wondering about the progress of the claim. He started to question the respondent about the vehicle premium paid to the bank and the insurance premium which was debited from his account on a monthly basis. He questioned this with the respondent who refunded the complainant R2 575, which represented the complainant’s instalments. There was still no word on the process of the actual claim. The respondent was reportedly going through the police report in order to come up with a vehicle valuation. All promises made to the complainant to reimburse the money were not kept. Fed up with the situation, the complainant referred the matter to the Office of the Short-term Ombudsman, who in turn referred the complaint to the FAIS Ombud as Model Insurance was not a registered insurer according to the Short-term Insurance Act. Acknowledgement of guilt The FAIS Ombud approached the respondent to clarify the claims made by the complainant. The respondent was asked to either settle with the complainant, or to provide evidence to the Ombud why the company did not contravene any of the guidelines set out in the FAIS Act. The respondent did not settle and the company did not provide any communiqué with the Ombud. The respondent was then investigated by the Ombud in terms of contravening certain sections of the FAIS Act where the respondent was again asked to send the Ombud certain documentation. Again, this was not forthcoming. However, in its determination, the Ombud did point out that two e-mails were worth noting. In the first e-mail, Model Insurance Chief Executive Officer (CEO) Pieter de Wet said, “I do not know why all of this is happening and why you are wanting to open a case against me, I have told you that we are busy with the complainants claim and only found out the other day that the vehicle was hijacked, I am now liasing with his bank to settle this matter and await an email from the bank of deregistration and a settlement figure so we can settle the vehicle. Please do not damage our company further as it has been damaged enough.” In response to the Section 27(4) notice the respondent stated, “I have received the mail, and if I am currently unemployed and unable to pay what then? I have, on numerous occasions, tried to get silence for two years and have gotten in touch with the registrar at the Financial Services Board (FSB) to find a way forward but was told that I would need R10 million in cash for that or hand over the clients to a registered company which I did hand over to Sapcor as I was told. We did pay claims until the FSB warned the public about model insurance and we started having a lot of cancellations and were unable to pay claims in the last period. So at the moment, I would like to settle these amounts, but cannot due to unemployment and would like to make an offer once I have a job.” Time to pay the piper The Ombud concluded that the respondent has no defence against the allegations, and therefore the complaint is upheld. The Ombud did take into account the amount paid to the complainant by the respondent, and the revised book value of the vehicle. The respondent was therefore instructed to pay the complainant R158 475 plus interest of 9% a year. There are still a lot of unanswered questions regarding Model Insurance. The FSB did know that Model Insurance was acting illegally, but had to go through a long process to physically stop them from operating. If they are the registrar, why did they have to go through this process? The FSB advises that in such cases, the public can access information on registered financial services providers and their representatives on their website. However, navigating to this page is complicated for those within the industry, so a person going to the FSB page for the first time will battle to find it. Editor’s Thoughts: The financial services industry operates on a basis of trust. The public trusts a company that tells them they are a registered financial services provider. They also trust that their claim will be resolved in an efficient and professional manner. It is situations like this that has prompted the FSB to introduce new legislation in the industry that gives increased protection to consumers. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected]. Bookmark and Share Comments Added by Robert W Vivian, 10 Oct 2014 The heading of this article is very misleading; Model Insurance finally faces the music. From the heading I expected to read that criminal charges had been laid against to operators of Model Insurance and they were about to appear in court, not that a worthless Fais determination is going to be handed down. It is a criminal offence and has been since at least 1923 if not earlier to carryon the business of an insurer unless registered to do so and licensed for that particular class of business. Taking premiums pretending to be an insurer, also, will probably constitute the common law criminal crime of fraud. Taking money pretending to be an intermediary, while not in fact being one is probably yet another statutory crime. There is lots of music to be faced but as I see it the band has not even been assembled let alone started to play. There is so far no music being played let alone faced. Report Abuse Added by Craig A, 09 Oct 2014 Why is this an FSB issue? Its fraud, plain and simple. The guy should be arrested and jailed! Is this statement correct: The respondent was asked to either settle with the complainant, or to provide evidence to the Ombud why the company did not contravene any of the guidelines set out in the FAIS Act. OR? Shouldnt it be AND?? So if they paid the claim but werent compliant then its OK? My FSB fees are due soon and i will i pay them with absolute contempt! They are never at fault, nor does it seem that they have to be responsible to anyone. I think they should pay the claim. They know about this fraudster yet let them continue to rip off the public! They are just as guilty! Report Abuse Added by Ayanda, 09 Oct 2014 Dear Jonathan, By now it must have dawned that no amount of additional legislation on the statute books or in the ever-growing accompanying regulation, can ever stop those determined to defraud the public. Hence the fact that in our Roman Dutch law we encompass the maxim of caveat emptor - buyer beware. More black ink on white paper will not put a stop to any crime, be it fraud, rape, murder or theft. This must now be abundantly clear as the crime goes on unabated, notwithstanding the tsunami of words that has continued to flood forth from the FSB since 2002, to say nothing of the massive yet fruitless growth in their annual expenditure. Simple policing - by the police - is what is required.
Posted on: Tue, 14 Oct 2014 08:07:19 +0000