'I've been crying every day': hope for Constantia insurance policyholders

“I have been crying every day about this.”

Lungile Ncgobo’s mother, Thoko, died at 65 last month. Compounding the Protea Glen resident’s grief is that the life policy she’d paid premiums for on her mother’s behalf every month for more than four years was unilaterally cancelled by Constantia Insurance Company, with effect from the end of March.

In a letter dated June 29, Constantia rejected her claim on her mother’s CoverGrow policy, saying the policy had been cancelled.

That’s despite the fact that three days earlier, on June 26, a judgment handed down in the Johannesburg high court found that there was no legal basis for the unilateral cancelling of more than 5,200 policies and that they remain in force.

For the relatives of those policyholders whose loved ones have died since March 31, the judgment came as a huge relief but in the weeks that followed, Constantia failed to confirm that it would honour those claims, or reach out to policyholders.

But the company has now confirmed that it is “in the process of implementing the order to give effect to the judgment”.

“We will be distributing e-mail communications to all policyholders in the next seven to 10 days,” Constantia’s group marketing general manager Alex Taljaard told TimesLIVE.

“We have studied the judgment with our legal representatives and taken direction from the prudential authority.”

Ncgobo had received the claim rejection letter only one working day after the judgment, Taljaard said.

“We were still reviewing the judgment, therefore the status quo on communications remained, so as to not cause further confusion until an internal decision had been made.

“Given the outcome of our internal discussions, our operational team have since stopped the distribution of outcome letters and have contacted those who received these letters between April and June, stating that a reassessment will take place.”

Ncgobo confirmed that she’d since received an e-mail from Constantia, advising her of that. She and her daughter stand to receive about R300,000 from her mother’s policy, she said.

“Maybe I can start to hope now ...”

When Paul Chase got that “Don’t be alarmed, but we’re cancelling your policy” SMS from Constantia at the end of February, after almost five years of paying R700 a month in premiums, he was furious, as he couldn’t afford to take out similar cover with another insurer.

He died suddenly, and unexpectedly, in his sleep on June 4 at the age of 71.

“That left my mom in a very difficult situation,” said his daughter Robyn, who only recently learnt of the high court judgment.

The applicants in the case were Hermione Nell and 73 others who took out policies covering illnesses, accidents and death with Constantia - only to be told via SMS in late February that they were to be cancelled with effect from the end of March.

The court ordered that:

• Constantia’s cancelling of its two policies, Prime Living CoverGrow and Prime Living Legacy, held by the 74 applicants, was unlawful and of no force and effect;
• The policies are still in existence;
• Constantia is to notify all policyholders - about 5,270 - that they may lodge claims for insured events since the date of the “purported cancellation”; and
• Constantia must give them all 30 days from the date of the order to pay premiums since March, should they wish to remain insured by those policies.

The policies were “expressly and aggressively” marketed as providing “cover for life”, judge Bashier Vally said.

But when the policies were sold over the phone, no mention was made of the small print in the contract, which was only sent the policyholders later. It read: “The Insurer may cancel this policy on 30 days’ written notice ...”

They were lulled into a false sense of security by being told they had “cover for life”, the judge said.

Constantia had until today (Friday) to appeal the judgment.

The judge said Constantia’s contention that a particular “sub-rule” in insurance legislation empowered the company to cancel the policies with a month’s notice was “misplaced”, as was the finding of the FSCA “to this effect”.

In breaking the shocking news to policyholders in February, Constantia said: “In terms of the new Insurance Act insurers may no longer conduct life and non-life insurance under the same licence.

“Your Prime CoverGrow policy meets the definition of a 'life policy' as defined in the Insurance Act, and given that Constantia Insurance Company Limited is licensed as a non-life insurer, we may no longer provide this cover.”

So what now for all those policyholders, given that Constantia’s conversion of its licence to that of a non-life insurer came into effect on July 1, meaning it cannot continue to sell short-term insurance products?

“For the policies to remain in effect after 1 July 2020, another underwriter would have to take over those policies; there would have to be willing buyer and willing seller scenario,” said Alex Peral of law firm Fluxmans Inc, which represented Nell and the 73 others pro bono, as did the advocates Duncan Turner and Douglas Ainslee.

“That leaves the policyholders in a predicament, unless it is determined by the prudential authority that these policies must stay in place, somehow.

“The most obvious solution appears to be that the policies should be transferred to another Constantia Group company that does have a life licence.”

Peral said the policyholders’ premiums on the CoverGrow policy varied from R500 to R1,600 a month, for cover which grew by R80,000 every month to a maximum payout of up to R5m.

“Some were very close to that R5m when the policies were cancelled, just as Covid-19 - which the elderly are most at risk of contracting - hit SA.

“What made the policy so attractive to people who were older and had underlying health conditions is that the premiums were cheap for what grew to be a large payout.

“To get something similar now would cost them close to R20,000 a month.”

Vera Louw of Strand in the Western Cape took out the CoverGrow policy on behalf of her 71-year-old mother Hermione Nell - the first applicant in the court case - after seeing an advert for it on the back of a toilet door at her local shopping mall. She was paying R1,500 a month in premiums when she got that “we are cancelling this policy” SMS in late February.

Outraged, she went on to HelloPeter, connected with others in the same predicament and formed a WhatsApp group that led to the court case.

“I couldn’t just leave it,” she said. “How the hell can a company do that to people?”

Constantia told TimesLIVE that bringing this matter to finality was “of utmost priority”.

“We thank all policyholders for their patience in this regard.”

• Affected policyholders can contact Constantia via e-mail or telephonically on 021 431 2650.

GET IN TOUCH: You can contact Wendy Knowler for advice with your consumer issues via e-mail: consumer@knowler.co.za or on Twitter: @wendyknowler.