Paula Luckhoff3 July 2024 | 18:48

Claims against dodgy brokers: You can now take complaints up to R3.5m to the Ombud

Consumer ninja Wendy Knowler explains the implications of the FAIS Ombud decision.

Claims against dodgy brokers: You can now take complaints up to R3.5m to the Ombud

Meeting, discussion, dispute,

The Ombud for Financial Service Providers (FAIS Ombud) has finally increased the claims amount it can deal with after more than 20 years.

The compensation limit has jumped to R3.5 million from just R800 000.

The Office describes its mission as one to promote consumer protection and 'enhance the integrity of the financial services industry through resolving complaints impartially, expeditiously and economically'.

This means that the FAIS Ombud essentially deals with complaints from insurance clients against their intermediary, or broker, says consumer journo Wendy Knowler.

According to Ombud John Simpson, brokers are expected to do a lot more than be 'a mere conduit or postbox' for their clients’ transactions with insurers. 

"Their duties and responsibilities extend far beyond that. And if they don’t 'get' that, and act accordingly, they could be made to pay for any losses suffered by a client as a direct result of their failure to do so."
Wendy Knowler, Consumer Journalist

In a recent case, the FAIS Ombud ruled in favour of a client who had her claim for a stolen vehicle rejected, and then filed a complaint against her broker.

The claim was rejected by her insurer on the grounds that she’d failed to have a specific high-level tracking device installed in it.  

RELATED: Your broker could be made to pay up for rejected claim if you weren't properly advised

The client said her broker didn’t tell her that the insurer made the installation of a particular tracking system in her Land Cruiser a condition of cover.

The broker's company was ordered to pay the client more than R300,000.

Knowler says it's long been the case that the limit of R800, 000 on claims has compromised the effectiveness of Ombud, restricting consumers’ access to this free form of dispute resolution.

Consider that formal litigation is so costly that it's not an option for most people.
This is what the Ombud Coucncil said about shifting the maximum award from R800,00 to R3,5m:

“The increase is necessary to ensure that the compensation the FAIS Ombud is empowered to award recognises changes in the value of money and market realities since the compensation limit was first set two decades ago.”
Ombud Council

And it’s also more in line with the compensation which other financial sector ombud schemes can award consumers, Knowler says.

The much higher compensation limit is not expected to radically increase the number of complaints submitted with the Ombud’s office.

What it will do is reduce the number of cases where the Ombud is unable to order fair compensation, Knowler points out.

That’s because up to now the FAIS Ombud has not turned away consumers with far bigger claims against their brokers, but they’ve had to agree that they won’t be getting an award of anything higher than R800,000.

She warns consumers NOT to give their business to an intermediary/broker who isn’t FAIS-authorised as the Ombud won’t consider your complaint if you get a raw deal.

For more detail, listen to the interview audio at the top of the article