Regulatory update - The new ombud regime from 01 March 2024


Enjoy this month’s regulatory update brought to you by Patrick Bracher from Norton Rose Fulbright, our Corporate Partner.”

The National Financial Ombud Scheme came into force on 01 March 2024 to replace the long-term ombud and the short-term ombud.

Insurers (as well as banks and credit providers) have agreed to establish a new non-profit company, the National Financial Ombuds Scheme NPC, to resolve financial services complaints. The company is a non-profit company without members and is therefore managed and governed by the board. The board consists of representatives of the financial institutions involved, the FSCA, the National Credit Regulator, and the statutory Ombud Council, the umbrella body.  The NFO will appoint a Head Ombud who is also the chief executive officer of the company. The individual activities of the existing ombud schemes will be preserved by establishing divisions within the NFO headed by an ombud appointed to adjudicate the complaints of that particular division (life and non-life insurance, credit provided by banks (with limitations), and complaints against other credit providers).

Complaints include not only complaints by a financial customer but also the beneficiary or life insured under a policy, anyone who pays or contributes to a premium, and potential customers who include those who have received advertising from the insurer. The limits for complaints (in the absence of agreement) for non-life insurers is R10 million for complaints arising from homeowners/building cover and R5 million for all other types of cover. There is no monetary limit for life insurance complaints. The NFO can, in addition, award up to R50 000 to a complainant as compensation for material inconvenience or distress or financial loss suffered as a result of error, omission or maladministration (including manifestly unacceptable or incompetent service) on the part of an insurer. Interest can be added to an award at a rate and from a date considered to be fair.

The detailed rules are available on the NFO website and on the websites of the previous ombuds.

As in the past, the NFO will be funded by the participants according to a budget approved by the board of the NFO.

The ombud can refuse jurisdiction, dismiss a complaint, deal with a complaint by conciliation or mediation, make a recommendation or provisional ruling, and failing acceptance a final Ruling. Even if a final Ruling has been made, the ombud can reopen the matter if new facts come to light and a new complaints process will then commence. If necessary a hearing of the complaint can be held by the NFO ombud concerned. If the NFO relies on an expert, the insurer may have to pay or contribute to the cost of the expert at more or less the usual market rate. Disputes of fact can be resolved by the NFO ombud on a balance of probabilities. The ombud determines what, in its opinion, is an equitable, fair and reasonable outcome in all the circumstances.

There is a right of appeal to an Appeal Tribunal consisting of three members who are retired judges or senior counsel. Leave to appeal will be granted or refused by the Tribunal. Only one of the members of the Tribunal needs to hear the matter.

Existing ombud complaints at 29 February 2024 will be resolved by the NFO ombuds in accordance with the rules of the previous schemes.

Insurers must notify their customers within six months of the new provisions. All disclosures and disclosure notices will have to include details of the NFO. No-one else within the industry may call themselves an “ombud” and any in-house “ombud” so called will have to change their titles to adjudicator or something similar.

Everyone who might be affected must read the NFO rules as soon as possible.

Patrick Bracher
Norton Rose Fulbright South Africa
March 2024