Lewis Group will ‘co-operate’ with Tribunal on insurance mis-selling probe

10 July 2015 - 10:29 By Wendy Knowler

The country’s largest furniture chain‚ Lewis‚ stands accused of selling employment loss and disability insurance policies to credit customers who were pensioners or self-employed and thus weren’t eligible for the cover. It has referred the matter against Lewis Stores and Monarch Insurance - both part of the Lewis Group - to the National Consumer Tribunal‚ with a request that it imposes a fine on the Lewis Group‚ and orders the company to refund the affected consumers and conduct an audit.“Pensioners and self-employed consumers are not employed and thus cannot be retrenched or become redundant from employment‚ so they should not be offered loss of employment cover as part of credit insurance”‚ said NCR company secretary Lesiba Mashapa.And the disability cover they were sold only applies to those who are unable to continue with their occupations after they’re disabled.So essentially the pensioners and “self-employeds” are paying those premiums - R8.75 for each R1000 of insurance cover‚ which is added to their furniture instalments every month - for nothing.Based on the sample of contracts examined in the investigation‚ Mashapa said‚ the practice was “widespread”.This is the first case of mis-selling of credit insurance which the regulator has referred to the Tribunal.In response‚ the Lewis Group - which targets customers in the fast-growing middle- to lower-income market - said the referral related to three cases.“The directors and management of Lewis Group are committed to co-operating fully with the Tribunal to ensure satisfactory resolution of the case.”The group has a credit customer base of 690000 and 69% of sales are conducted on credit. Credit sales totalled R1.8-billion in the 2015 financial year.Credit insurance is a lucrative side business for the major furniture retailers‚ as they are legally entitled to insist that their credit customers have credit life insurance during the time of the agreement so that the loan will be paid should something happen to the customer.Customers can have their own insurance policies‚ but the vast majority of low income customers don’t‚ making them a captive market for the furniture companies’ in-house add-on policies; their first encounter with insurance.But it has long been a concern to government and consumer groups that credit insurance products are relatively expensive and poorly disclosed‚ with unsophisticated consumers simply being told to “sign here‚ and here…”Along with excluding the self-employed‚ most job loss policies have other limitations‚ such as there being no pay-out if the person is retrenched within 30 days of the policy being taken out.Questioned about how these policies are sold to customers‚ a Lewis Group spokesman said no insurance advice was provided in-store."If a customer would like to purchase insurance they are provided with an information pack and then advised to contact a call centre managed by an independent third party‚ General Legal and Administration Services.”He said the credit application forms were completed by sales staff and store managers interviewed all customers before a credit agreement was completed‚ “explaining all the elements of the contract‚ insurance and the total cost of credit”.So it would appear to be up to the store managers to ensure that pensioners and self-employed customers don’t end up paying for useless policies. - RDM News Wire, The Times..

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