The Complainant inherited a homeowners’ insurance policy taken out for her late husband, which was later found to be underinsured. When she filed a claim, the payout was significantly reduced due to the application of the average clause.

The issue was whether the Respondent failed to meet its statutory duty to disclose the risk of underinsurance and the effects of the average clause, and whether proper advice was given during the policy’s lifetime and transfer. Under the FAIS Act, specifically Sections 2, 7(1)(a)-(c), 8, and 9 of the General Code of Conduct, financial service providers must act honestly, diligently, and in the best interest of the client, including providing full disclosure of material terms and maintaining a written Record of Advice.

The Office found that the Respondent did not conduct a financial needs analysis, failed to document or explain the implications of underinsurance, and relied on undocumented verbal communications. This resulted in non-compliance with FAIS and Treating Customers Fairly (TCF) principles. The Office concluded that the Respondent breached its regulatory obligations and recommended a fair resolution, offering a compensatory amount to the Complainant.

The Respondent then proposed a settlement of R50,000.00 as compensation, which she accepted.