INSURANCE COMPANIES have been ordered to pay over €600,000 in awards and repayments to dissatisfied customers arising from the latest batch of complaints settled by the Financial Services Ombudsman.
The ombudsman, Joe Meade, yesterday released the details of 21 significant findings he had made in the second half of this year, 11 of which were upheld and 10 rejected.
Mr Meade said the number of complaints his office is handling is up 28 per cent so far this year while the number of complaints involving alleged misselling of investment products or bad advice has increased by 250 per cent.
"We're seeing the effects of the end of the Celtic Tiger, when people thought everything would be rosy, and now they're finding the value of investments can fall as well as rise," he said.
He urged both customers and financial institutions to exercise care in the current economic climate before entering agreements they might later have cause to regret. "People need to be cautious when investing. They shouldn't rely completely on outside advice and they should remember there is a 30-day 'cooling off' period they may wish to take advantage of."
Total payouts to consumers as a result of the ombudsman's investigations over the past four years now exceed €45 million, according to Mr Meade. About 61 per cent of cases are settled in the complainant's favour.
In the largest award published yesterday, the ombudsman directed an insurer to pay a customer who had been seriously injured in a "horrific" accident €325,000 in specified illness benefit. The insurers had argued that, while the person's injuries limited his physical capacity and his intellectual ability, he did not qualify for benefit under the policy heading of "loss of independence".
The man's two friends had been killed in the accident and he remained in a post-traumatic state of amnesia for six days. His injuries left him unable to bend, suffering pain to his groin and with reduced mobility and pain in his left arm. He also suffered frequent nightmares and panic attacks.
In assessing his injuries, the insurance company found that he had failed a number of tests; it found, for example, that he could climb stairs and dress himself.
However, Mr Meade found that the man could dress himself only in a basic sense and managed by doing without socks and wearing slip-on shoes. He had difficulty negotiating the step to his shower, slept downstairs and suffered short-term memory loss.
The case, and previous ones involving people with disabilities, highlighted the need for companies dealing with vulnerable customers to disallow claims only when they were sure of the facts, Mr Meade said.
In another case, Mr Meade directed an insurance company to reimburse a customer the €250,000 it had invested on her behalf in a UK geared property fund. The customer, a retired teacher, had complained after discovering that the fund was high risk and the value of her investment had dropped by €100,000.
In this case, the woman obtained a €250,000 mortgage on her family home. She was going to buy an apartment in Paris but was persuaded to invest in the fund instead. She claimed she was not told this fund was high risk.
The company argued that she was "willing to appreciate" the risk and the question of whether its advice was good or bad would only be answered in the long term.
Mr Meade said it was strange that the company formed the opinion that an individual relying mostly on pension income was a suitable candidate for the investment of a substantial sum of borrowed money in a product with a higher risk profile than the risk tolerance recorded for her.
The company's advice that the product "lacks the volatility" associated with equity markets was, according to Mr Meade, "nothing short of disingenuous".
The geared fund was "simply not suitable" to her circumstances. "She was retired from work, supplementing her pension income with income from lodgers and by carrying out grinds, but she did not have large amounts of money available to put at high risk."
He directed the company to reimburse the woman. The company appealed the decision to the High Court but later withdrew the appeal.
In other findings, the ombudsman ordered an insurance company to pay €3,000 in compensation to a couple whose €100,000 investment fell by €13,500 after a year, and told another company to pay €14,000 to a customer for poor service. He rejected a claim by a teacher whose €90,000 fund investment had fallen significantly in value. The woman claimed the money was her 92-year-old mother's but the company rejected this and said the 17-year term had been chosen to coincide with the entry of the woman's child to university.