The National Financial Ombud Scheme (NFOS) has recovered and returned R328.5 million to South African consumers between March and December 2024, following over 35,000 complaints lodged across insurance, banking, and credit sectors.
Howard Gabriels, the divisional lead ombud for the credit sector, revealed that more than R200 million of the total amount was paid out to consumers in life insurance and disability claims where insurers had initially refused to honor policies.
Life Insurance Complaints Dominate Payouts
The bulk of the recovered funds stemmed from disputes over life insurance policies, particularly cases where insurers failed to pay out after a policyholder’s death or disability. Funeral policies also contributed to the high payout figure.
Gabriels noted that Old Mutual Life Insurance faced the highest number of formal complaints (628), accounting for 18% of cases, followed by the Liberty Group. However, he emphasized that the ombud’s role is not to penalize companies but to provide an independent dispute resolution mechanism for consumers dissatisfied with insurers’ decisions.
Credit Division Highlights Unfair Retail Practices
In the credit sector, major grievances included:
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Value-added services (e.g., data bundles, club memberships, credit life insurance) being added to retail accounts without proper disclosure.
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Flawed minimum payment calculations, where consumers’ payments did not reduce their outstanding balances because retailers only applied them to the core debt, ignoring third-party charges.
Gabriels cited an extreme case where a consumer had 13 additional services on a retail account, making it nearly impossible to settle the debt. Several retailers have since agreed to adjust their billing methods following the ombud’s intervention.
A Growing “Garden of Justice”
Since its launch in March 2024, the NFOS has consolidated four separate financial ombudsman services, streamlining complaints handling. Gabriels described the scheme as “fast becoming the garden of justice in the financial sector,” highlighting its role in boosting consumer confidence.
The ombud’s latest report underscores the importance of alternative dispute resolution in holding financial institutions accountable while providing consumers with a fair, impartial recourse when disputes arise.