(John McCann/M&G)
INSURANCE
Differing approaches to death have long been a source of contention, a battleground for competing moral ideologies and discourses over what is right and wrong. But the commodification of life and human values was unheard of and the eventual emergence of an approach that treated an event regarded by many as sacred as a vulgar commodity provoked an ethical storm.
Enter the insurance industry in the 1700s and the contentious issue was: Can we place a monetary value on life? According to Viviana A Zelizer, who did a comprehensive study on the rise of life insurance in the United States, “life insurance, by definition, implies a value put on human life”. Death redefined as an event ending a person’s earning capacity would signal the birth of the insurance industry.
Although life insurance seemed the perfect solution to the economic destitution of widows and orphans, it was seen as dehumanising and unethical to place a value on human life. The materialistic assessment of death and, even worse, the idea that a commercial pact or a money transaction depended on death for its fulfilment was condemned. Life insurance, however profitable, was considered dirty.
The industry got off to a slow start in the 18th century and its rise in the 19th century was based not so much on economic factors but rather on the harnessing of moral and ethical justifications. The argument was that everyone dies, and protecting your loved ones after your death is the right thing to do.
The approach to life insurance shifted from resistance to acceptance.
Life insurance was thus marketed as an “altruistic, self-denying gift rather than a profitable investment”.
Today, however, the ever-expanding industry still faces some scepticism. After all, the business of the industry is to make people talk about death and plan for it in monetary terms, though it might be added that the superstitious view that thinking about or planning for death will bring it on still holds in some communities and families.
But morality and ethics remain the Achilles heels of an industry that many believe should act in good faith.
This week, Momentum has been the subject of moral outrage for initially refusing to pay out a R2.4-million claim of the deceased Nathan Ganas and then staunchly defending its decision.
The case brings to the fore the normative business issues of the insurance industry, issues of right and wrong, how sometimes fairness and justice are incompatible and the subjectivity of the principle of good faith and integrity.
Nothing brings home this point more than the discussion on the Eusebius McKaiser Show on 702 on Monday. The group chief executive of Momentum, Hillie Meyer, said it would not be “right” to pay out the claim; Momentum had to protect the integrity of the industry, its business and the interest of all its clients who completed their applications with full disclosure.
Did the client act in good faith by not disclosing material facts about his health? Did Momentum act in bad faith by repudiating the claim based on the nondisclosure of material facts? Are there degrees of good faith?
At the centre of the furore is nondisclosure, misrepresentation and the materiality of the nondisclosure, especially if nondisclosure has no material bearing on or link to the cause of death.
According to Momentum and the long-term insurance ombudsman, legally, the company did nothing wrong. But the moral outrage that followed the news raises the question: Did Momentum do the ethically right thing?
Ganas died in a hail of gun shots while protecting his family. By rejecting the claim, Momentum denied Ganas his moral obligation to protect his family after his death, flying in the face of the insurance firm’s own ethical argument.
Using contractual law and industry principles, Momentum argued that Ganas did not act in good faith when he concealed information about his condition, diabetes, when he applied for insurance.
Momentum’s appeal to a moral code of conduct is meant to get us to confront several thorny questions before expressing outrage. Among them are, as clients in the insurance industry, would you pay money to assist someone who had lied, omitted certain facts and did not abide by the rules that we are all subjected to? Is it fair that some of us stick to the rules of insurance while others get away with it?
According to Momentum, the insurance industry has an obligation to existing clients to act consistently to manage the shared pool of risk.
But this reasoning cannot hold based on the materiality of the nondisclosure in Gamas’s case.
And it is not the first time that we have become aware of this kind of issue. Last year, Old Mutual repudiated a claim in the case of a man who had also died in a shooting based on nondisclosure, but the matter was settled before it went to court.
The ombudsman, Judge Ron McLaren, argued on Cape Talk: “If the applicant does not disclose the previous diagnosis and the policy gets issued, and six months down the line the insurer discovers that there had been a nondisclosure … The insurer would in law unquestionably be entitled to cancel the policy.”
And he added: “It is not a requirement that the nondisclosed information must relate to the insured event.”
But it is surprising that McLaren said last year: “Where a death occurs unrelated to the nondisclosed medical condition, the medical condition should not be a factor in denying the claim.”
Why did he not reach a similar conclusion in the case of Ganas?
Unfortunately for Momentum Life chief executive Johann le Roux, insurance companies might be able to take pride in taking unemotional decisions, but death is an emotive issue, and so is money, especially when it relates to the upkeep of a deceased’s family. Fairness is an emotive issue.
Public relations crises often arise because of an emotional reaction. Therefore, as Momentum learned this week, a logical explanation isn’t enough. For the company to describe Gamas’s death as tragic was distasteful. Momentum missed out on an opportunity to respond sympathetically to people’s feelings and concerns, instead of using legal reasoning.
Public outrage by people who are looking for morally sound financial and insurance products is justifiable, especially when there is a disconnect between fairness and justice.
Now that Denise Ganas has accepted the settlement, the matter won’t go on appeal and we will never know whether Momentum did the right or wrong thing in rejecting the claim initially, we will never know if Momentum did the right or wrong thing with this new product. We have been robbed of an opportunity to interrogate the ombudsman’s conclusion on the matter, given his previous comments.
We do not know how he reached a conflicting conclusion. And we will never know what the appeal conclusion would have been. Will we have to wait for another insurer’s unethical “misconduct”?
The principle of good faith is the backbone of the insurance industry, which must provide the insured with an accurate and honest picture of the nature of the risk. But the matter has also exposed the weaknesses and vulnerability of the industry, and we need to question the vulgarity of the sometimes unscrupulous business nature of the industry if it is ever to gain back our trust.
Andiswa Makanda is a producer at 702. These are her own views