Two Ombudsman and several stalwarts of the financial and insurance sectors called for the use of "Plain" English.

At a recent seminar, they concluded that a revolution in the legal language was necessary to promote financial products, especially insurance, which would be fair to the consumers.

The unintelligible legal jargon contained in insurance proposals came in for some stick at a seminar on ‘Public Awareness on Ombudsman Schemes Related to Banking and Finance’ organised by the National Chamber of Commerce last week.

"The way the language is formulated in an insurance proposal is conducive towards people not disclosing what is being asked of them," Nihal Fonseka, CEO, DFCC Bank said.

"Of course, banks are no better," the banker noted, "you cannot get anything out of a bank without having to sign ten times. And our documents are plagued with a plethora of small print."

"These documents are drafted by lawyers and only they seem to understand them. At times, it is difficult for bank staff to understand these documents. So how can we expect our customers to understand them?"

Fonseka questioned the fairness of financial contracts where only lawyers understood the text on banking and insurance documents.

"Many contracts are one-sided and it seems that the fair contracts law of the country is not developed. Both banking and insurance sectors can do a lot more to simplify the language.

"Corporate clients have their lawyers, but individuals rely on fairness and this is not necessarily what they get," Fonseka said.

However, insurance is more complicated than banking and many disputes in insurance arise because people only find out later what exactly they are covered for when filing in a claim.

"The way the language is used makes it difficult for people to be more truthful when filling in insurance proposals because the questions are not specific," Fonseka said.

"Many within insurance companies argue over what a certain paragraph or phrase really means and many interpretations are given. We really can understand the client’s position," President of the Insurance Association of Sri Lanka, Jagath Alwis said.

Alwis said that some insurance companies had taken the initiative to simplify the language in their brochures for a start but said that more needs to be done.

He also pointed out that many insurance proposals were in English and that translations were not done as it would distort (the already garbled—parenthesis our own) the meaning.

Some noted that for reinsurance purposes that it was difficult to dispense with the legal jargon.

However, the Insurance Ombudsman, Dr. Wickrama Weerasooria said that some developed countries had done away with legal jargon entirely.

"There are instances where judges had torn-up documents in court and admonishing the financial institutions to develop documents in plain English," Dr. Weerasooria said.

During the discussions the bankers and insurers agreed a change was needed.

However, Dr. Weerasooria pointed out that a Plain English Revolution could only be possible if the judiciary itself would champion the cause.

He said that Sri Lanka had legislation on fair contracts but that it is almost dormant or ineffective.

Dr. Weerasooria was joined by the Financial Ombudsman, a former Judge, U. Mapa in requesting the industries to create more awareness about the two Ombudsman schemes.

Dr. Weerasooria said that an Ombudsman scheme was the best way to resolve disputes and helps retain the trust of consumers in a particular industry as it offered a much cheaper and quicker resolution than would regular legal recourse.

"Many people, including lawyers, are unaware of the Ombudsman schemes in the country," he said.

He went on to share a brief history of Ombudsman schemes in Sri Lanka.

Sri Lanka’s first ombudsman was established in 1978. Known as the Parliamentary Ombudsman, the office looks into disputes of public servants.

The Financial Ombudsman was established in 2003, followed by the Insurance Ombudsman in 2005.

The Tax Ombudsman scheme was established in 2005 by the Finance Ministry to look into the grievances of the tax paying public.

The Press Complaints Commission of Sri Lanka (est. in 2003) and the Commissioner of Tourism Administration (est. in April this year) function similar to Ombudsman schemes.

"Many members of the public are not aware that there are Ombudsman schemes. More media publicity about the schemes is required," Dr. Weerasooria said.

He points out that accept for the Parliamentary Ombudsman scheme the rest do not disseminate their annual reports to the public.

Dr. Weerasooria, however, released his report with approval from the insurance industry (see Island Financial Review of 11 August 2008).

"As in most countries these annual reports should be published in a uniform basis so that they can be accessible for public comment or criticism. This is most essential for the success of Ombudsman schemes as it helps to establish the integrity and impartiality of the office," Dr. Weerasooria said.

The Insurance Ombudsman scheme was an initiative of the Insurance industry which received the blessings of its regulator, the Insurance Board of Sri Lanka.

The Insurance Ombudsman can inquire into complaints where the disputed amount is less than Rs. 500,000. But, there are times the insurance companies have agreed to go beyond this threshold.

During the year, from March 2007 to February 2008, the Insurance Ombudsman’s office received 378 complaints.

The breakdown of the complaints were: third party motor insurance claims, 25 percent; comprehensive motor insurance cover, 10 percent; life insurance related complaints, 25 percent; fire and burglary, 20 percent; complaints from agents against agents, 10 percent and miscellaneous complaints, 10 percent.

The complaints received on non payment of claims on comprehensive cover on motor vehicle policies where related to penalties imposed on policy holders for undervaluing their vehicles to get away with paying smaller premiums.

The issues relating life policies were mainly due to non-disclosure of medical histories and the failure to pay in premiums.

Dr. Weerasooria said that 90 percent of the fires and burglaries had been self induced.

Mapa said that since its inception the Financial Ombudsman’s office had settled 316 disputes in favour of the complainants and 134 in favour of the financial institutions (banks, leasing companies and specialized financial institutions that were members of the scheme).

The Financial Ombudsman is authorized to look into specific disputes as mandated to it and the rulings are binding on the financial institutions.

"Financial Institutions who are members of the scheme are required to put up a notice about the scheme in banking premises that customers would be aware of such a scheme," Mapa said.

Our own observation is that while banks are filled with banners and posters advertising their products a notice of the existence of the Financial Ombudsman could not be seen (if we missed it, it was because the advertising was too eye catching, however some bank’s had displayed the scheme displayed on their noticeboards).

A feature of both schemes is that lawyers are not allowed to speak at hearings, if allowed to be present at all.