Murder Motivates MMI to Honor Claims Insurer Says Are Immaterial
(Bloomberg) -- MMI Holdings Ltd. -- which backtracked on a decision to reject the insurance claim of a murdered man after an outcry on social media -- said the cost of honoring similar contracts will be immaterial to its earnings.
South Africans took to social media over the weekend when it emerged MMI’s life-insurance unit, Momentum, had refused to settle a family’s claim because the murdered man failed to disclose a pre-existing medical condition. MMI stood by the decision until Tuesday, when the group said it would pay all claims linked to violent crime that were previously rejected for non-disclosure.
MMI has done an estimation on the cost of settling backdated claims “and it’s a drop in the bucket,” Deputy Chief Executive Officer Jeanette Marais said by phone Thursday. “It’s going to cost less than an advert in the Sunday paper, that’s for sure. It’s not a lot of money. It’s not a lot of claims.”
The Pretoria-based insurer’s share price dropped more than any other insurer on Wednesday, closing 1.9 percent lower. That extended declines this year to 15 percent, compared with a 2.7 percent fall in the five-member FTSE/JSE Africa Life Assurance Index. As the stock’s value slid, MMI spent 1.9 billion rand ($138 million) buying back shares between between March 7 and Nov. 20, the insurer said in a separate statement.
Amid shrinking profit, MMI has been beset by a number of management departures with former Deputy CEO Mary Vilakazi leaving in March and Hillie Meyer replacing Nicolaas Kruger as head of the group in January. Full-year net income for the 12 months through June fell 11 percent as MMI’s new team struggled to return the business to growth.
The company expects to have finalized a list of clients its decision may impact in the next few days, Marais said. On average, the insurer rejects four out of 1,000 claims for non-disclosure, she said.
The Financial Sector Conduct Authority, which aims to improve integrity in the industry, said the Momentum saga had provided an opportunity for all insurers to look at improving confidence and fairness.
“There is often a disconnect between what customers think is fair and what the industry deems fair based on decades of practice and precedent, as the public engagement on this case has highlighted,” the Pretoria-based regulator said in an email. “In the discourse it was argued that Momentum’s initial response to the family was in line with market practice. This impacts on confidence in the sector holistically.”
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