LEWIS GROUP REFUNDS R67.1 MILLION TO INSURANCE CUSTOMERS

Lewis Group is refunding R44.1 million to a group of its customers for the cost of loss of employment insurance mistakenly sold to them, together with R23 million in interest accrued on this amount.

After an extensive internal investigation of all insurance transactions conducted since 2007, the group identified a minority of cases where loss of employment insurance policies were erroneously sold to pensioners and self-employed people. The investigation was undertaken after the National Credit Regulator notified the company of three cases of such sales of insurance.

These erroneous sales were the result of human error at store level, and contrary to company policy which prohibits the sale of these insurance policies to pensioners and self-employed people.

These cases represent less than 1% of all insurance premiums earned by the group over the eight-year period since 2007. Loss of employment insurance cover is used to settle customers’ outstanding balances on their credit agreements in the event of their retrenchment or redundancy.

Pensioners and self-employed people cannot be retrenched, and are therefore not eligible for this cover. Management is currently contacting customers to arrange for the repayment of these amounts. About 30% of those affected are existing Lewis customers and the refunds have been credited to their accounts.

The remainder of the affected people have settled their accounts and Lewis is in the process of refunding these customers. Lewis has taken widespread corrective action and implemented further control measures to prevent any further instances of such sales taking place.

The group has significantly improved its IT systems to address these matters. Management oversight at branch level has also been increased. Staff training, testing and monitoring at branches has been enhanced to reduce the possibility of human error. This includes a focus on the interview conducted with customers ahead of completing a sale agreement during which the selection of insurance options is explained.

All customers who are recorded at store level as being a pensioner or self-employed are being verified as part of the centralised credit approval process to ensure loss of employment insurance is not being sold to them. The provision for the R67.1 million refund to customers will be reflected in the group’s interim results which will be released on SENS on 9 November 2015.

REFERRAL TO THE NATIONAL CONSUMER TRIBUNAL

As shareholders were advised on 9 July 2015, the National Credit Regulator (“NCR”) referred a complaint relating to two of Lewis Group’s operating subsidiaries, Lewis Stores Proprietary Limited (“Lewis”) and Monarch Insurance Company Limited (“Monarch”) to the National Consumer Tribunal (“NCT”).

The complaint relates to selling insurance policies providing loss of employment and disability cover to pensioners and self-employed consumers who were not entitled to the benefits provided under these policies. Lewis and Monarch have filed comprehensive answering affidavits and the NCR has filed a replying affidavit, together with a request for condonation for the late filing thereof. Lewis has also applied for an order directing the NCR to furnish further documents.

No date has been set for the hearing of the matter and the NCT is still to inform the parties of a date for a pre-hearing meeting.

Statement issued by Lewis Group through the JSE SENS Service, 27 October 2015