School head faces 41 counts of graft

insurance ombudsman

The principal of Abra High School and two others have been indicted for graft for failing to remit premium payments made by the school’s employees to the Government Service Insurance System and Home Development Mutual Fund in 2004 and 2005.

The Office of the Ombudsman recommended the prosecution of Abra High School principal Jose Bermudez, cashier Eleanor Ballesta and bookkeeper Estrelita Lumdang.

Graft Investigation and Prosecution Officer 1 Raquel Cunanan-Marayag has recommended the filing of cases against them: 41 counts of violation of GSIS Act of 1997 for failure to remit the GSIS premium of complainant Amilcare Panelo; two counts of violation of Section 52(g) of Republic Act 8291 for failure to remit complainant’s GSIS loan amortizations; four counts of violation of Sec. 52(g) of RA 8291 for the delayed remittance to the GSIS of complainant’s loan and 11 counts of violation of Sec. 23 of Presidential Decree 1752 (HDMF or Pag-ibig Fund Charter) for failure to remit complainant’s HDMF premium.

The filing of the charges against the respondents before the Sandiganbayan was approved by Acting Ombudsman Orlando Casimiro.

The Ombudsman junked the claim of Bermudez and Lumdang of any responsibility for the alleged non-remittance of GSIS and HDMF premium and GSIS and HDMF loan amortizations. Both said it was not their duty to remit premium and loan amortizations of Abra High School employees to the GSIS and the HDMF.

Marayag said Bermudez as school principal was responsible for monitoring and supervising all the activities of the school, including administrative matters.

On Lumdang, Marayag said her responsibility was not confined only to recording the school’s financial transactions and safekeeping of its financial records, but also of the financial operations of Abra High School.

“Necessarily included in the financial operations of the school is the collection and payment of the amounts due GSIS and HDMF,” Marayag said.

The Ombudsman likewise rejected the argument of the respondents that the delay was due to the unreliability of GSIS records as the reason for the unpaid premium payments generated from the GSIS Data Base which the complainant used as basis of these complaints.

“If it were true that respondents had been consistently paying and remitting complainant’s GSIS premium, then definitely, they have in their records proofs of remittances thereof. However, respondents did not submit any GSIS receipt and the list of employees covered by the corresponding remittance to disprove the data contained in the GSIS Statement of Service without Premium Payments dated July 29, 2005…,” Marayag said.

Without proof of remittances, Marayag said the data contained in the July 29, 2005 GSIS Statements of Service without Premium Payments stands.

Independent SC framework sought

insurance ombudsman

PETALING JAYA: The Securities Commission’s (SC) proposed alternative dispute resolution (ADR) framework for resolving retail investors’ disputes with intermediaries should be truly independent unlike existing current mediation and enforcement bodies, say consumer groups and financial industry observers.

Federation of Malaysian Consumer Associations (Fomca) secretary-general Muhammad Sha’ani Abdullah said the framework must include a stringent code of ethics and compliance standards to be adhered to by all officials appointed to the proposed ADR body.

“This will address the perception of independence and must be given utmost importance so the organisation does not repeat the mistakes of many other enforcement agencies. There must be no exception or monetary limitation to limit or prevent cases to be lodged and adjudicated. All officials, full-time and part-time, must not in any way be involved in capital market activities including as directors of the member organisations,’’ he told StarBiz.

Sha’ani added that the framework must mandate a timeline for complaints handling to encourage first-level complaints to be resolved at member level.

All resolutions by adjudication must be binding on members but individual complainants should be free to seek further or higher level dispute resolution avenues, he noted, adding that all decisions must be posted on SC website.

Precedent case decisions must be used to resolve or mediate similar new cases to prevent delays in resolutions as well as to improve the members’ trade practices, said Sha’ani, who is also the National Consumer Complaints Centre CEO.

Consumer Association of Penang president S.M. Mohamed Idris suggested appointing an ombudsman instead of setting up a mediation-like bureau to redress investors’ disputes.

The ombudsman, an independent and impartial official who investigates complaints from the public, would have greater creditability as he would have no ties with financial intermediaries, he said.

“One of the reasons the present Financial Mediation Bureau (FMB) has a credibility problem is that its mediators are chosen by the FMB board, where of the nine directors, four are from the banking and insurance industry.

“Board members, in turn, are appointed by FMB members who are all from the banking and insurance industry,” said Idris.

The intermediaries too should have no say in the hiring of the mediator/ombudsman, he said. The FMB is an independent body set up to help settle disputes between customers and their respective financial service providers.

Idris stressed that the services should be free for consumers and suggested ADR have more branches unlike the Kuala Lumpur-based FMB.

A SC spokesman said the commission hoped to set up the ADR framework next year and was conducting various studies for its effective implementation, including the experience of other countries.

MyFP Services Sdn Bhd financial planner and managing director Robert Foo believes that having independent individuals on board will prevent any conflict of interest.

In this respect, there should be very clear internal procedural guidelines about what was a conflict of interest situation and how the mediation procedure should proceed, he said.

There should also be checks and balances in place with regards to who could be appointed as mediators, he added.

Foo believes FMB and the ADR body should merge to become a one-stop centre for all disputes and claims relating to financial products and services.

“To have one for capital market products and another for so-called banking products can be confusing to the public. One should also note that financial products are now blurring the boundaries between normal banking, insurance and investment services and offerings.

“For instance, investment-linked insurance products should come under capital market since they are essentially investment products and yet they are considered insurance products and do not come under SC’s ADR body but under the FMB. They should all be merged,” Foo said.

Another important duty of mediation bureaus was to provide feedback to the regulators to remedy the mis-selling and misrepresentations that constantly occurred in the financial and capital market industry, he said.

The SC should also improve on the type of information available to the public. For example, there is currently no aggregate industry information readily available to gauge whether Malaysian unit trusts have been giving good returns.

Citing some irregularities in the unit trust industry, Areca Capital Sdn Bhd CEO Danny Wong said: “There are quite a number of ‘grey areas’ whereby investors were short-changed by irresponsible players who “churn” funds for commission.

“There are also cases where consumer rights were abused by unreasonable investors such as disputes in acceptance of transaction requests due to incomplete forms or non-receipt of requests through facsimile, the timing for which could create a price difference of the transaction.”

Fortress Capital Asset Management (M) Sdn Bhd CEO Thomas Yong, while advocating the Australian experience where a similar body comprised industry participants, said: “The industry must be convinced that it is always in their interests to have a self-regulatory body to weed out rogue players and ensure all industry interest groups’ commitment to the body.

“Before the body is set up, a proper preparatory work must be done to ensure that the body’s policies are clear and comprehensive.”

Great Vision Advisory Group head of tax and financial consulting Datuk Chua Tia Guan said fair treatment should also be accorded to financial intermediaries in dealing with disputes.

In this regard, he said, the views expressed by the financial service providers must be heard and treated equally as those of the investors.

The mediation procedures and timeline must be clearly spelt out as lengthy mediation process would add to the cost of doing business and unfavourably impact the growth of the financial industry.

A pilot project should be carried out to ensure that the proposed mediation body could operate effectively and efficiently, said Chua.

Insurance companies do pay genuine claims

insurance ombudsman

Sir, Antonia Senior wrongly depicts the insurance industry as not wanting to pay out on insurance claims and scam customers. This does not represent the insurance industry of today (Opinion, Nov 13).

Insurance companies are in the business of paying out on genuine claims — in 2008 the industry paid out £239 million a day in pension and life insurance claims and £57 million a day in general insurance claims. All our member companies are committed to ensuring that customers take out insurance policies that are fit for their individual needs and that customers are clear about what their policy covers. The Association of British Insurers (ABI) and its members work closely with regulators and the Financial Ombudsman Service (FOS) to overcome any issues that arise.

The FOS highlighted in its annual report this year the work that insurers have done to reduce dramatically the number of declined critical illness insurance claims for non-disclosure of medical information. We are campaigning for a change in the tax rules to allow customers to benefit from more timely payments of life insurance claims, which will help low-income households to cope better financially when a loved one dies. Our work on pensions has meant that annuity payments have been speeded up and more people now shop around for the best annuity rate. These are just a few of the recent developments insurers have been involved in to ensure that customers can have confidence in the insurance industry.

Does your insurer provide your medical report?

insurance ombudsman

Last week, my friend Hemant approached me with a problem which may sound mundane, but caused him a lot of trauma, courtesy an insurance company. Acting on my advice, he bought a term insurance policy as I always thought it was important even though he had an impressive profile -- age 42, high-placed professional in an MNC bank, decent income, good savings, low debt, and to top it all, a fitness buff. Based on this, I had recommended him an amount which ran into crores as sum assured.

So I was surprised when an anxious Hemant called to tell me there was a problem.

Hemant had filled up the form, paid the premium and undertaken a battery of medical tests. Given the size of the policy, he had to answer quite a few questions, besides having the company's personnel visit his office to verify details.

The process was completed smoothly and it was time for him to receive the policy. Then came the shocker, with the insurance company informing Hemant they would be charging him a higher premium. Reason? There were some issues with his medical reports, so he would be required to pay extrato get the policy and the insurer wanted his approval in the matter.

At this point, Hemant was anxious to find out what these health-related issues were, rather than talk about the policy. But when he asked for his medical reports, the insurance company informed him that his medical reports were their property and cannot be divulged. He was aghast.

When Hemant mentioned this to me, I made my research team to do a quick check on the practices followed by various insurance companies in disclosing medical reports to the insured.

They informed me that most companies will provide a photocopy of the medical reports on request, whereas one company was willing to provide copies only to the family doctor named in the insurance proposal form. But the company chosen by my friend was an exception and did not provide reports to the insured at all.

A quick look at the Insurance Act, 1938, showed that Section 51 of the act requires an insurer to supply the "policy holder" with the medical reports. So, legally speaking, Hemant was entitled to a copy of his medical reports after paying a princely sum of Re 1, once he became a "policy holder", which means after he paid the extra premium and took the policy.

In case the company still refused to give him the medical report, he could have to file an official complaint on the insurance company's website. In case that did not elicit any response, he would have to file a complaint with the insurance ombudsman or the alternative grievance redressal mechanism of Irda.

By this time Hemant and his wife were very worried and had decided to repeat all the tests at his cost as he did not want to wait for the insurance company to follow-up on his request.

I told them not to worry much as it was unlikely there would be anything seriously wrong-- if that was so, the insurance company would have declined to issue the policy, rather than charge an extra premium.

I asked him to instead follow-up with the insurance company after he took the policy, since those reports would also serve as a very useful checking point against any reports that he would obtain on his own.It is unfortunate that Hemant had to go through this distressing experience. Let's hope other consumers are spared such an experience.

Protecting the sufferers from being fleeced

insurance ombudsman

Track record of Insurance Ombudsman across the country augurs well for the protection of consumers' and policy holders' interest. Need is greater awareness among the policy-holders -CK Sardana

Following her husband's untimely death while in service in a colliery, Parvati Devi, a young illiterate woman having two daughters and a son - all below 10 years - became a widow. The death benefit for her amounted to nearly Rs nine lakh, besides a paltry monthly pension of Rs. 1800.

She deposited the entire amount in a leading Public Sector bank. Word spread fast in the insurance circles. A smart agent of a Private Sector insurance company met her, showed lot of sympathy for the loss of her husband and used all marketing and selling techniques. He succeeded in persuading her to withdraw the amount and use that for insurance in his company. The agent assured her that the amount, to be deposited for three years under single premium, will get doubled within three years. Wonderful.

She fell into the trap and complied with all that the agent had told her. No sooner one year was over, she got a notice from the insurance company asking her to pay the premium, every year, for full ten years.

She was shattered and approached the insurance company to cancel the policy and refund the amount. Incidentally that insurance agent was not to be seen anywhere. The company flatly refused to refund the amount. She was in a trap.

Parvati Devi approached Insurance Ombudsman for help. After hearing both the parties at length, Insurance Ombudsman, in charge of MP & Chhatisgarh, directed the company to cancel the policy and refund full amount of premium ie Rs. 8.5 lakhs with 9% interest pa within 15 days.

Like this, there are umpteen number of cases where smart and well-dressed persons, posing to be the only well-wishers of the victims of some tragedies, lure the poor and illiterate persons to fall into their trap by either concealing vital information or misrepresenting the facts.

The Insurance Sector

The Insurance Sector in India, covering both life and general, is the largest sector in the world. It is vulnerable because of very high financial stakes involved. Number of persons taking life and general insurance policies runs into thousands of crores. So is the amount involved.

The insurance business was and is still being controlled and carried out under the provisions of Insurance Act 1938. Life Insurance business was nationalized in the year 1956 followed by General Insurance business which was nationalized in the year 1972.

Nationalization of insurance business was done with the objective of serving the needs of the economy better by securing the development of insurance business in the best interest of the community and to ensure that the operation of the economic system does not result in concentration of wealth to the detriment of the common man.

With the start of the era of globalization and the launch of New Economic Policy in 1990-1991, providing for greater share and participation of the Private Sector in national development, large number of private players, initially from within the country and lately from abroad, entered the insurance, banking and other sectors. Since they had to compete with the well-entrenched Life Insurance Corporation of India and General Insurance Corporation of India, they had perforce to indulge in lot many practices. As times passed, it was found that the consumers, in this case, those taking insurance policies were, in quite a few cases, being fleeced through unscrupulous practices and through misrepresentation and misinformation of vital information to the prospective buyers of insurance policies.

A need was, therefore, felt to have such a mechanism through which the lowest of the low person in the country could be protected from unethical and unscrupulous practices. I have given the example of just one poor illiterate woman, Parvati Devi in detail. Like this, there would be thousands of similar cases of exploitation by the insurance companies who, in their objective of business expansion through any means, exploit the situation in utter disregard of consumers' interest.

Encouraged by the success achieved through the institution of Banking Ombudsman, created by the Government in the year 1995, the Government decided to take concrete steps for the protection of those taking life and general insurance policies.

The Insurance Ombudsman

Following the successful functioning of Insurance Ombudsman in Sweden, the institution of Insurance Ombudsman was created by a Government Notification dated 11th November, 1998 with the purpose of quick disposal of the grievances of the insured customers and to mitigate problems involved in the redressal of those grievances. There are twelve Insurance Ombudsmen at Bhopal, Bhubaneswar, Cochin, Guwahati, Chandigarh, New Delhi, Chennai, Kolkata, Ahmedabad, Lucknow, Mumbai and Hyderabad.

This institution is of great importance and relevance for the protection of interests of policy holders and also in building their confidence in the system. The institution has helped generate and sustain the faith and confidence amongst the consumers and insurers. The above example of the protection of Parvati Devi speaks of the positive role of Insurance Ombudsmen.

Powers of the Ombudsman

Insurance Ombudsman has two types of functions to perform (1) Conciliation (2) Award making. He is empowered to receive and consider complaints in respect of personal lives of insurance from any person who has any grievance against an insurer. The complaint may relate to any grievance against the insurer i.e. (a) any partial or total repudiation of claims by the insurance companies, (b) dispute with regard to premium paid or payable in terms of the policy, (c) dispute on the legal construction of the policy wordings in case such dispute relates to claims; (d) delay in settlement of claims and (e) non-issuance of any insurance document to customers after receipt of premium.

Ombudsman's powers are restricted to insurance contracts of value not exceeding Rs. 20 lakhs. He has been empowered to resolve all complaints relating to insurance policy documents, settlement of insurance claims and disputes regarding premium payable/paid, refunds and interpretation of terms and conditions of the policy. The insurance companies are required to honour the awards passed by an Insurance Ombudsman within three months.

The procedure for approaching the Insurance Ombudsman has been deliberately kept simple. Any aggrieved person can complain to him with details of documents and the specific grievance for redressal. The awards are binding upon the insurance companies. If the policy holder is not satisfied with the award of the Ombudsman, he can approach other venues like consumer forums and courts of law for redressal of his/her grievances.

Steady increase in the number of complaints received by Insurance Ombudsmen and their redressal shows that the policy-holders are reposing their confidence in the institution of Insurance Ombudsman. NA Khan, a retired District & Sessions Judge of MP and presently Insurance Ombudsman in charge of Madhya Pradesh & Chhatisgarh said in an informal chat, the track record of Insurance Ombudsman across the country augurs well for the protection of consumers' and policy holders' interest. Need is greater awareness among the policy-holders and recognition of its role by the insurance companies and others involved in this business, he added.