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Understanding The Dangers Of Non-Disclosure

Author: Jason Snyman
Date: 2019-08-27
Last year, insurance company Momentum faced the wrath of the public after refusing to honour a client's R2.4 million life insurance claim due to seemingly trivial details. In this article, we revisit the story to find out exactly how this happened, and why.

If there’s one true thing about all South Africans, it’s that we sure can rally behind a cause. This is exactly what happened in March of 2018, and in the firing line - insurance company Momentum.

You may recall the harrowing story of 42-year old Nathan Ganas, who was tragically shot and killed while protecting his wife, Denise, during a hijacking in the driveway of their Shallcross home, in Durban. The couple’s then 10-year old daughter was also injured by stray bullets tearing through the front of the house during the onslaught.

Mrs. Ganas then had to fight tooth and nail to get a R2.4 million life insurance payout, which had been declined by Momentum on the grounds that Nathan Ganas had not disclosed the fact that he had previously suffered from raised blood sugar levels – putting him at risk of diabetes.

You - as was the majority of the country at the time - may be wondering what the correlation could possibly be. Nathan Ganas, as reported in the post mortem, had died of gunshot wounds – not diabetes.

Momentum had not only rejected the claim, but had also asked Mrs. Ganas to repay the R50 000 instant cash benefit from the policy, which the family had used to pay for Nathan’s funeral.

How could such a seemingly grave injustice be allowed to happen? Let’s revisit the story, and unpack the details. 

Non-Disclosure

The insurance underwriting process is a pivotal stage in gaining cover. The applicant has to be entirely honest and open, and in the case of life insurance, disclose any and all past and present health-related issues. The underwriter will then assess the level of risk this applicant represents and set the premium price accordingly, or sometimes, if the risk is too high, even refuse to issue cover altogether.

Nathan Ganas did not disclose that he had been suffering from high blood sugar levels when applying for cover, but was he even aware of it?

Mrs. Ganas has stated that as far as she was aware, her husband had not been using any chronic diabetes medication prior to his application for the policy.

After being rejected by Momentum, Mrs. Ganas approached the Ombudsman for Long-term Insurance, who then carried out a comprehensive investigation into the case. An independent re-insurer discovered evidence – based on five tests over a three-year period prior to the policy application – indicating that Nathan Ganas was almost certainly aware of raised blood glucose issues at the time of application.

Whether or not he was aware of the fact that he was fully diabetic at the time of the application, however, is up for debate.

It is for this reason that Momentum rejected the life insurance policy claim, and according to strict rules and regulations, the insurer is fully within its right to do so. But, the cause of death was still unrelated, so how is this relevant?

What's The Relevance?

So, it is beyond all doubt that Nathan Ganas had failed to provide all the relevant information regarding his health. If he was aware of the problem, why didn’t he disclose it? And even if he wasn’t aware of it, how is this pertinent? As stated before, he did not die by the hands of diabetes, but under tragic circumstances – so why was his claim rejected?

In many other countries, life insurance claims are still settled if the cause of death happens to be unrelated to a non-disclosure breach. Unfortunately, this is not the case in South Africa.

According to Momentum, the cause of death, and the fact that it is completely unrelated to a pre-existing condition, is irrelevant. The insurer stated that Nathan Ganas had an obligation to provide all the relevant information during the application process, so that the risk could be properly underwritten.

The insurer stated that in this particular instance, had the applicant disclosed the relevant information when required, and given the abnormal nature of the blood tests which later came to light during the claims process, it is beyond doubt that Nathan Ganas would not have been granted any life cover. And, if he had not been granted life cover to begin with, then the claim would never have existed at all.

The Ombudsman then asked Momentum if it would consider applying the Didcott Principle – in which an insurance company may have been misled, but might have still have entered into a contract under different terms. Momentum refused, stating that it would still not have issued Nathan Ganas with any cover, not even under different terms, and therefore the Principle did not apply.

Is this to say that people suffering from diabetes cannot get access to life insurance? Certainly not. Momentum itself has said that it would provide cover to clients whose diabetes is controlled within acceptable limits, who are treatment compliant and who don’t have any other diabetic complications or additional risk factors.

Unfortunately for Nathan Ganas, according to the insurer, his level of diabetes would have proven too great a risk to insure. 

Public Backlash

Despite facing a relentless barrage of backlash from the South African public, Momentum dug its heels in and stood firm on the decision. 

Our position on this matter is the following, once we have evidence that a client has not acted in good faith, we rectify the matter in an objective manner, and in the interest of fairness to all our clients. If we do not do so, we indirectly encourage the practice of non-disclosure. This will in turn result in a worsening claims experience which would ultimately increase the premiums for all our clients.

As a small condolence, the insurer retracted the request for the widow to pay back the R50 000 paid toward her husband’s funeral, and also offered to reimburse the premiums the family had paid since 2014. 

Mrs. Ganas refused this offer.

Momentum clients all across social media threatened to cancel their policies as a show of solidarity. Even Radio 702 tore Momentum to shreds on air.

Protesters certainly had their hearts in the right place, but in the end, the boycotting of Momentum wasn’t going to - and never will - solve the problem. And the problem itself, unfortunately, might not be exactly what you think it is.

While Momentum’s initial response to the situation had been handled rather brashly, and could certainly have been deemed as amoral, unethical and uncompassionate by the public, all insurance companies are fully within their right to reject a claim when the terms of the contract have been breached.

It is important to separate emotion from the situation, which is incredibly difficult to do, given the circumstances – and take the bigger picture into consideration. It could just be that the majority of the outraged public wasn't fully informed about policy payouts and how they work

That doesn’t sit very well, does it? 

It may even feel like Momentum - and indeed, all insurance companies - are taking advantage of the fact that the common consumer really doesn’t know a whole lot about insurance, or how it works. The unpleasant truth is that the onus is on the client to ask questions when unsure of any particular aspect, no matter how trivial it may seem. Ask questions, again and again and again. That’s what your broker is there for. Overshare with your insurer if you must – it’s better than the alternative – because all insurance companies operate in exactly the same way.

Full disclosure is one of the most important factors in a client-insurer relationship, no matter the type of policy. To avoid these pitfalls, clients need to be compliant and well-informed. The insurance company, after all, will do what it needs to do to protect both itself and all of its other clients, even if it means taking a tough stand and doing the right thing – no matter how detestable and morally bankrupt that decision, at first glance, appears to be. 

For Momentum’s official statement on the importance of full disclosure, please read here.

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