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Ombudsman decisions - how successful could you be?

(Dated February 2022)

In New Zealand, all insurance companies, advisers and banks must participate in a dispute resolution scheme (DRS). The scheme provides their clients with an avenue to have their complaints heard by an independent arbitrator if the parties can't agree.

For insurance companies, the DRS of choice is usually the Insurance & Financial Services Ombudsman (www.ifso.nz). It is the Banking Ombudsman (bankomb.org.nz) for banks and for advisers; it's usually one of the four available options. 

Funding for each DRS comes from fees & levies paid by the participating organisations and advisers. So, although the arbitrator is independent, there is a financial relationship between the arbitrator and the complainee. 

In my opinion, this creates additional tension that shouldn't exist. I've been involved in other proceedings where my opponent fully funded the adjudicator. I can say that things went quite differently from what I expected. It even got to the point where my opponent was running out of valid arguments. So the adjudicator stepped in with a new line of questioning. At the end of the process, my lawyer assessed that I was railroaded, so he offered to work for me free if I wanted to battle further.

Interestingly, independent financial advisers are moving away from the Insurance & Financial Services Ombudsman as their preferred dispute resolution service. Many feel that having the same DRS as the insurance company is asking for trouble. If a decision about liability rests somewhere between the insurer (that provides a large part of the Ombudsman's funding) and an individual adviser, many feel like they could come off second best.

So, I thought I would quickly analyse the case studies reported on the ifso.nz website to see what proportion of complaints favoured the complainant. Here are the results in my two arbitrary categories as of 13 February 2022:

28% found in favour or partially in favour of complainant
Life, trauma, disability, and health complaints. 

17% found in favour or partially in favour of complainant
House, car, contents, travel & investment complaints.

Now, don't get me wrong. I think the Ombudsman and Dispute Resolution Services do an admirable job adjudicating these complaints. I don't believe they consciously make decisions weighted towards the insurer. In many cases, they simply don't have all the facts as no one with the right expertise has done a deep dive into every facet of the complaint. Often the DRS is left to make a decision based solely on the wording of the policy document.

Sure, the client didn't fully disclose her high blood pressure. But is it relevant that the adviser completed the form for the client and inexplicably recorded her height to weight ratio in the normal range when she was grossly overweight? Who's under disclosure was this? The clients or the advisers? 

The client said she didn't take high blood pressure medication even though her doctor had been pleading with her to do so. But is it relevant that the insurer only asked if she took medication and not whether her doctor wanted her to?

Not every decision rests on the policy wording. A fair decision can only be achieved if every facet is considered and weighed. This should include:

1. Whether the client could be viewed as a vulnerable customer?
2. Does the evidence show the client was always being truthful?
3. Did the adviser conduct him or herself appropriately?
4. Who completed the application form?
5. Did the insurer focus on its customer's needs when assessing the initial application?
6. Did the application wording encourage under or non-disclosure?
7. What does the law say about claims on older policies?
8. What was the likely motivation of each party when the cover was applied for?

If the insurer or adviser doesn't come up smelling of roses when all these questions are asked there's an excellent chance that a decision will be overturned.

Unfortunately, the Ombudsman is unlikely to look that far.

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