Insurer must be notified if you switch careers

Women’s magazines often run features on women who’ve given up safe corporate jobs to follow their passion and open up an artisanal bakery or become an adventure guide.

All I’m thinking when I hear such stories is: “I hope they’ve amended their insurance policies.”

Whenever you go through a significant life change — getting married or divorced, moving to a new home, changing profession — it’s far more important to share the news with your insurer or broker than posting it on social media.

You may assume it’s your broker’s responsibility to make sure your information is up-to-date, but they are not compelled to do that.

Here’s what’s at stake if you don’t disclose.

Absa’s life and disability policies, for example, include this clause: “Occupation: You must notify us in writing within 30 days of any change in occupation and/or duties of the occupation the life insured ...“If you fail to inform us of any change in occupation and/or duties of the occupation, we may cancel the policy with immediate effect and may keep any premiums paid as a penalty and repudiate any current or future claims.”

It’s that clause which nearly cost Penelope Sass, 55, her home.

She bought the Randburg property 20 years ago, bonded it with Absa and took out a number of policies with the bank’s insurance arm, including disability cover, for which she was most recently paying R2,500 a month, with a R761,000 benefit.

That insurance product, the “@Ease Catch All Disability Benefit” provides cover for the total and permanent inability of the policyholder to perform the normal duties of their occupation due to bodily injury or illness.

In 2017, Sass was diagnosed with severe cervical and lumbar Lumbar spondylosis, severely affecting her mobility.

She lodged a claim on that Absa policy a year later when her condition worsened, and after almost a year of deliberation, the insurer repudiated it three months ago on the basis that, in 2015, without informing them, Sass had switched professions.

She went from being a self-employed rental property administrator to a self-employed yoga instructor.

That is, until chronic pain forced her give that up in 2016.

“Due to this change of occupation, our underwriters concluded that they would have cancelled the ‘Catch All' disability benefit.

“This means that you would not have had a disability benefit to claim under for your medical condition of cervical and lumbar spondylosis.”

So her claim was rejected, and the policy was cancelled.

That left Sass in a dire predicament.

“My only income is rental from cottages on property, and I am unable to fully pay my bond, so this is a matter of whether I lose my home or not,” she told me.

“I have no family to assist me.

“My condition is inoperable and at times I am totally bedridden.”

I asked whether Sass’s broker had a duty to get in touch with her between 2013, when she changed her profession, and the time of the claim, and whether the physical risks associated with yoga instruction were so high as to render someone ineligible for that disability cover.

Dushen Naidoo, Absa’s Insurance managing executive, said policyholders were obliged to keep insurers informed about key changes in their circumstances, to ensure that their life cover matched their needs and expectations and was “appropriately priced” by the insurer.

The FAIS Act did not require a broker to do an annual revisit, review or reanalysis of the policyholder’s position for risk products, Naidoo said.

“There is also no duty on insurers to verify on a regular basis whether the information provided at application stage is indeed still correct or the same.”

Insurers are only obliged to provide a written statement annually with a summary of existing products — it is the policyholder’s duty to inform the insurer of any changes, he said.

Let that sink in.

While Sass’s change of profession to that of a yoga instructor “may seem immaterial”, he said, “that particular vocation can increase the policyholder’s risk of physical ailments”.

“Occupations that qualify for the @Ease Catch All Disability Benefit are administrative and cover white-collar workers — more physical and sports-related occupations do not qualify.”

In the past two years, Absa had improved its communication with policyholders and “raised awareness of these requirements”, Naidoo said.

“In the case of a claims complaint we consider all additional and mitigating circumstances to ensure that we have acted fairly towards the customer.

“As a result, we settle certain claims on an ex gratia basis, where we believe there are mitigating circumstances to take into account.”

Unfortunately, he said, Sass did not follow that process.

But here’s the happy ending.

“We have now taken this case through our claims resolution committee and agreed to settle the claim on an ex gratia basis,” Naidoo said.

The payout? R761,000.

Sass was, as you’d expect, ecstatic on hearing the news.

“I have not been able to afford medical aid, as I have been prioritising my bond payments so as not to lose my house.

“I will now be able to have medical aid and my chronic meds will be covered.

“I can get back to gym and lie in the warm pool which is soothing for my back, eat better and not stress as month-end approaches.

“Thank you, thank you.”

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