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FIA - Financial Intermediaries Association

FIA welcomes greater transparency in short term insurance complaints resolution report

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Justus van Pletzen, CEO of the FIA.

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In his address to industry stakeholders Ombudsman Dennis Jooste said that two of three Special Resolutions agreed to at the organisation’s 2011 AGM had been implemented during the year under review.

One of the resolutions was to increase the OSTI board from nine to eleven members by including two additional ‘independent’ directors. This was done to address perceptions that the insurance industry had too much influence over the office.

The second was the inaugural publication of statistics relating to the workings of the Ombudsman’s office per insurer. “Our member insurers decided that in the interest of transparency the Ombudsman’s office be instructed to publish details of its workings,” said Jooste. He added that this was the latest step in the evolution of the relationship between his office and insurers.

“In the early days the OSTI could only make non-binding determinations. Nowadays we are controlled by an Act of Parliament, our independence is guaranteed and member insurers are contractually bound – as a condition of membership of our scheme – to abide by any formal rulings made by the office of the OSTI”. The relationship has evolved from a tentative flirtation between insurer and Ombudsman to the mature arrangement that exists today.

“We welcome the Ombudsman’s decision to include insurer statistics in its annual report,” says Justus van Pletzen, CEO of the Financial Intermediaries Association of Southern Africa (FIA). “It introduces a new level of transparency in the interactions between client and insurer at the most crucial time of the short term insurance policy, namely the claims stage.”

The OSTI said that the decision to publish these statistics was an innovation initiated by its members and approved by the FISOS Council. It has been a long time coming. “We have frequently raised the issue of insurer accountability with successive Ombudsmen, the Financial Services Board and National Treasury,” says Van Pletzen “After all, the best way to keep product providers and advice givers in line is to place the facts and figures in the public domain and let the consumer be the judge”.

Consumers of short term insurance products have been able to take their claims disputes to the OSTI for a number of years now. The office has jurisdiction over short term personal lines claims disputes up to R2 million (for motor and household contents policies) and R4 million (for home owners policies). It also has limited jurisdiction in commercial lines disputes which constituted only 4.8% of claims in 2012.

Highlights from the latest report include 9123 formal complaints received, 10397 files closed and R113.7 million recovered on behalf of insurance consumers, with these numbers broadly in line with those reported in the preceding four annual reports. Marked improvements in 2012 include a reduction in the average days taken to resolve complaints to 183 days (from 223 days) as well as a steep decline in the number of matters unresolved after six months to just 352 cases.

The number of complaints reaching the OSTI each year confirm that insurance transactions can and do go wrong. In such cases financial consumers are better off with a financial or risk adviser at their side.

“Both the regulator and consumers expect insurance intermediaries to conduct their businesses ethically and to act with integrity at all times,” concludes Van Pletzen. “The FIA is pleased that insurers will now be subject to public scrutiny insofar their claims repudiation practices are concerned.”

“Thanks to the innovations introduced in the OSTI 2012 Annual Report, insurance consumers can transact comfortably in the knowledge that all insurance providers that are members of OSTI will be scrutinised on their claims dispute resolution processes”.

Since detailed statistics on insurer claims performance are now publicly available the OSTI decided to discontinue the Isabel Jones Ukusizana Award. The annual award was previously given to insurers with exemplary track records in co-operating with the office in the complaints resolution process.