Consumers to safeguard life insurance policy documents

June 15, 2018

Consumers to safeguard life insurance policy documentsIn a world full of uncertainties, people hold on to things that give them a sense of stability and consistency.

They embark on business ventures to secure a good financial future, invest in their children’s education to ensure they are surrounded by opportunities later in life, and find ways and means to provide long-term support for their family.

One way to minimize future financial uncertainties is by having a life insurance policy. It is a vitally important financial product that helps support consumers and their families at times of significant stress.

Life Insurance is a contract between an insurance policy holder and an insurer. This is where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of an insured person (often the policy holder).

When deciding on an insurance policy, consumers must exercise due diligence and be aware of the various policies with different terms and conditions on offer in order to make informed decisions.

This is important as consumers are investing part of their income into these policies.Consumers are urged to ask questions and clarify all doubts with insurance agents before signing up for a policy.

Once a consumer has agreed and signed an insurance policy, it is important that they receive a copy of their policy document.

This document is needed by the policy holder in order to receive benefits, amend payments and apply for benefits, among other things.

Despite already signing a life insurance policy, in the event where a consumer decides to cancel the policy, the consumer is able to do so within 28 days of receiving the policy document and be provided with a full refund of paid premiums by the insurance company.

This is in accordance with Section 129 of the Insurance Act 1998, which stipulates that:

Subject to subsection (2), if an insured, on receipt of a life policy, or a policy in respect of any other prescribed class of insurance-

(a) objects to any term or condition of the policy;

(b) decides that the policy is not required; or

(c) decides that the policy cannot be afforded, the insured may, in writing, advise the insurer of the objection or decision and return the policy to the insurer.

(2) Subsection (1) only has effect during the first 28 days after an insured has personally received the policy or is deemed to have received the policy.(3)

Upon receiving a policy returned by an insured under subsection

(1), the insurer must forthwith refund any premium, without deduction for commission or any other expenses, which the insurer has been paid in respect of the policy and must cancel the policy.

Therefore, receiving a policy document is crucial as it enables consumers to read through the document to gauge if they had missed out on any information earlier and make decisions within the 28-day timeframe.

The Council received a complaint by Betty who bought a policy from an insurance company but did not receive her policy document.

Betty made arrangements for deductions to be made for her policy. 5 months later she realised that she did not receive her policy document. She contacted the insurance company and was informed that the document was sent to her postal address.

However, according to the insurer the insurance policy was returned to the company for some reason.

Frustrated, Betty decided to cancel her policy and sought a refund. The insurance company received her cancellation application and informed her that no refund would be provided.

Betty was advised that she could not surrender her insurance policy as the life policy was not in force for at least 3 years as required by the Insurance Act.However, after the Council’s intervention, Betty was able to receive a full refund of the premiums paid.

Generally policy termination or surrender are also matters of significant concern.

Policies surrendered before 3 full years would not fetch any surrender value and any surrender of the policy after 3 years means the insurance companies will determine the surrender value.

Consumers therefore, neither have any knowledge of what the surrender value of a policy would be before they purchase the policy, nor can they be assured that they would be paid a just and fair surrender value.

According to the Insurance Industry Report 2008, each year, insurance companies keep at least $2m in premium through surrenders and $11m through forfeitures.The Council urges consumers to be proactive and understand the terms and conditions of the insurance policies prior to signing up for it.

They must demand copies of the policy documents to be delivered appropriately once they have signed an insurance policy. .Consumers with questions or complaints can seek the Council’s assistance by calling our toll free helpline number 155.

*Please be advised that the Consumer Council of Fiji will be moving to its new office at Level 5, Vanua House, Victoria Parade, Suva, on 28 May.