The decision at the end of last year not to renew the contract of Brian Martin as the Ombudsman for Short-term Insurance (Osti) and to appoint Dennis Jooste in his stead may be invalid.
But the three-year term of the body that must consider the issue, the Financial Services Ombud Schemes (FSOS) Council, ended on December 31 last year, and a new council has yet to be appointed by the Minister of Finance.
The FSOS Council, which is a statutory body, in effect polices South Africa's voluntary dispute resolution ombud schemes.
The question mark over Jooste's appointment follows a breakdown in relations between the Osti board – in particular, those members who represent the short-term insurance industry – and Martin, who says that the industry unjustifiably interfered in his independence (see "It was follow the master's voice or else – Martin", below).
The Osti board issued a brief, low-key statement towards the end of last year announcing Jooste, a retired lawyer, as the new ombudsman and "paying tribute" to Martin.
The statement was silent about the fact that Martin's five-year contract had expired and that the Osti board had decided not to invoke the option to renew his contract for a further five years.
For the board's decisions to be valid, most of its members must be independent of the short-term insurance industry. This requirement has been confirmed by Gerry Anderson, the deputy executive in charge of market conduct at the Financial Services Board (FSB).
However, at the time the decision was taken to appoint Jooste, the nine-member board consisted of:
* Three members to represent consumers, of whom at least two are paid by the insurance industry to serve on the board.
* Jonathan Dixon, the deputy executive in charge of insurance at the FSB.
* Four members to represent the industry. One of these representatives, Barry Scott, the chief executive of the South African Insurance Association (SAIA), argues that he is an independent member, because he is not employed by one of the insurance companies that participates in the Osti scheme.
* A fourth consumer representative, Thami Bolani, who has taken a temporary leave of absence. This is because Bolani has become embroiled in a controversy as the chairman of the Estate Agency Affairs Board (EAAB), from which position he was suspended by Trade and Industry Minister Rob Davies following allegations that, as a result of a conflict of interest, Bolani contravened the conditions of his appointment.
The Hawks are investigating how NCF Consulting Enterprises, of which Bolani is chairman, allegedly pocketed R200 000 from the EAAB. Bolani has denied any wrong-doing.
As a result of Bolani's absence, the non-industry members did not hold an effective majority on the board when the decision was made not to renew Martin's contract and to appoint Jooste in his stead.
After initially refusing to comment, Gail Walters, the Osti board's chairperson and the head of group corporate affairs at Hollard Insurance, said the board was properly constituted when the decision was made.
Walters will not say why the Osti board did not renew its contract with Martin, and she has also refused to give reasons to Martin. However, Personal Finance has information that it was partly due to the growing animosity and clashes between the industry representatives on the board and Martin.
The industry representatives were concerned about Martin's insisting on having unfettered independence, some of his rulings and corporate governance issues.
Industry interference apparently peaked when Scott and Walters, either individually or jointly, tried, without success, to pass resolutions to censure Martin. This occurred after Martin issued a press release, published in Personal Finance, warning consumers about the deceptive nature of the Carprehensive policy underwritten by RMB Structured Insurance, and because Martin wrote a letter to the FSOS Council in which he expressed his concerns about the structure of a proposed appeal board for the Osti.
During Martin's tenure as ombudsman, the number of cases that resulted in consumers receiving some form of relief increased from 33 percent to 38 percent, while the value of awards to consumers more than doubled, from about R60 million to R130 million a year.
Scott, who denies interfering in Martin's independence, repeatedly side-stepped questions from Personal Finance about his clashes with Martin and his role in not re-appointing Martin, claiming board confidentiality.
And Walters, who responded on behalf of the Osti board prior to this report being written, said: "Much of the other information you seek is confidential, and the information you have presented is incorrect in a number of respects. It is also apparent to the board from the tenor of your emails and inquiries that you have prejudged the issues, and we do not intend to engage with you any further."
Walters did not say which information is incorrect and also ignored questions about the need for a body designed to protect consumer interests to be transparent.
Personal Finance has information that Walters never submitted Personal Finance's questions to the Osti board.
However, Walters later admitted that she, Scott and Ronnie Napier, the chairman of the SAIA, met at Hollard's head office in Johannesburg this week after she had refused to answer Personal Finance's questions. Napier sent an email to Personal Finance after the meeting denying that the SAIA interfered in the independence of the Osti.
* If you want to complain to the Osti about an insurance product, you can phone 0860 726 890, or fax 011 726 5501 or email info@osti.co.za
IT WAS FOLLOW THE MASTER'S VOICE OR ELSE – MARTIN
Former Ombudsman for Short-term Insurance (Osti) Brian Martin says he did not experience any direct interference from insurance companies during his term of office, "but huge pressure was brought to bear upon me to follow the industry line or approach to certain issues".
In reply to questions from Personal Finance, Martin says: "Where I declined to do so and made rulings which were regarded as being contrary to the policy of an individual insurer or the industry as a whole, especially where my decision was based on equity and not the strict letter of the policy, this usually resulted in a complaint to the South African Insurance Association (SAIA), who were then put under pressure 'to do something about the ombudsman'."
Martin says this resulted in his "relationship with the industry" being raised by industry representatives at meetings of the Osti board and at a lunch that Martin had with SAIA chief executive Barry Scott and SAIA chairman Ronnie Napier.
At the lunch last year – prior to Martin being told that his contract would not be renewed but that he could re-apply for the position – "I was informed that I was 'out of step'" with the industry, he says.
Martin says he indicated his willingness to engage with anyone who was not happy with any of his decisions and to explain in full the basis for these decisions.
Martin says he regarded the "pep talk" he received from Scott and Napier as unwarranted interference in his independence.
"Scott regularly stated at board meetings that my relationship with the industry had hit 'rock bottom', and I was left under no illusion that if I wanted to get a favourable performance appraisal, I would have to curry favour with the industry. It was a case of 'follow the master's voice' or else," Martin says.
When he was interviewed by the Osti board after he re-applied for his position, Martin says that Scott made much of his alleged undermining of the board due to the concerns Martin had expressed about a proposed appeal process for the ombudsman's office, and his relationship with the insurance industry and Gail Walters, the chairperson of the Osti board.
Osti board responds: Walters, on behalf of the board, says: "We view Mr Martin's version as self-serving and inaccurate. In addition to what we have already placed on record, at our first board meeting of last year, on March 31, 2011, the board advised Mr Martin that we had elected not to renew his contract, but invited him to apply for the position afresh, along with other candidates, which he did.
"Because Mr Martin's letter relates to issues under his private employment agreement subject to a confidentiality clause binding on Mr Martin, we have no intention of debating these issues in the media. Our decision not to do so should not be construed as our acceptance of the correctness of Mr Martin's assertions."
QUESTIONS THAT INDUSTRY BOARD MEMBERS WON'T ANSWER
Questions from Personal Finance that insurance industry representatives on the board of the office of the Ombudsman for Short-term Insurance (Osti) declined to answer include:
* Why Brian Martin was dumped as ombudsman last year.
* The nature of the relationship between the industry representatives on the board and Martin, including questions specifically relating to a press release issued by Martin that warned consumers about an RMB Structured Insurance product, Carprehensive, and a letter that Martin wrote to the Financial Services Ombud Schemes (FSOS) Council in which he expressed his concerns about aspects of a proposed structure to which decisions of the ombud can be taken on appeal.
* The nature of the proposed appeal structure. The proposal was before the FSOS Council before it dissolved at the end of last year, and no decision has been made.
Personal Finance has information that the structure could result in consumers having to seek expensive legal assistance when a company appeals a decision that has gone against it. This could negate the government's determination, stated in a policy document last year, to have disputes between consumers and financial services companies resolved quickly and cheaply.
* A proposal to add two independent members to the Osti board. This matter was apparently also being considered by the FSOS Council before it dissolved.
TREASURY TO MEET BOARD, SAIA
The National Treasury will meet with the board of the Ombudsman for Short-term Insurance and the South African Insurance Association to hear their views on the contoversy surrounding the decision not to re-appoint Brian Martin.
Ismail Momoniat, the deputy director-general at the National Treasury, says it is important that any negative perceptions are dispelled as soon as possible, because the office of the ombudsman plays a critical role in protecting consumers from unfair practices.
This is the first time there have been any allegations of interference in, or problems related to, the process of appointing the ombudsman, Momoniat says.
Source : iol.co.za
Tags: south africa insurance ,ombuds man,
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