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A caution from the Insurance Ombudsman

23 January 2020
Deanne Wood, former Ombudsman for Short-Term Insurance

Deanne Wood, former Ombudsman for Short-Term Insurance

We received a press release from the Insurance Ombudsman and this once again highlighted the importance of disclosure and the value of a broker.

A claimant who submitted 12 claims with a total value of almost R300 000 over a period of three years has had her latest claim for loss of possessions rejected by her insurer on grounds of non-disclosure of the previous claims.  The insurer also voided the policy. 

A lie is a lie

Bending the truth to reduce the perceived risk came back to bite the Johannesburg woman when the former Ombudsman for Short-Term Insurance, Deanne Wood, upheld the insurer’s rejection of the claim and its decision to void the policy.  

The rejection was upheld on the ground that the insured misrepresented material information regarding her previous losses. 

The matter related to the insured’s claim for the theft of her laptop and camera out of the boot of her motor vehicle on 2 April 2019. 

During underwriting, the insured was asked to disclose any losses she had suffered in the preceding three years (26 November 2015 to 26 November 2018). The insured disclosed one burglary incident which occurred in November/December 2017 to the value of approximately R20 000. 

Claims and more claims
Following the insured’s alleged loss, an assessor was appointed to validate the claim. The insurer advised that the assessor discovered that the underwriting information provided by the insured was not correct. She found that the insured failed to disclose additional claims submitted to her previous insurer during the relevant three year period. 

From databases, it was established that 12 claims with a total value of R291 499 were recorded in the insured’s name. Just between 18 February 2017 and 15 November 2018, the insured submitted a total of seven claims relating to household contents and portable possessions eventually causing the previous policy to be cancelled based on an “unfavourable claims history”. 

In her latest claim, the insured informed the assessor that her laptop and camera were previously stolen in 2013. She stated that they were both subsequently replaced and never stolen again until the reported incident. The assessor discovered that the insured claimed for similar items with her previous insurer after 2013 and was compensated for that loss. The current insurer argued that the insured intentionally provided misleading information relating to the claimed items. 

Terms and conditions
To support its rejection of the woman’s latest claim, the insurer cited the following relevant sections of the policy wording: “We may refuse to pay a claim under this policy or cancel the policy from the date on which you have deliberately or dishonestly tried to take advantage of us. 

“We may also take legal action against you. If this happens, you will have to repay all amounts which we previously paid towards your claims under this policy.” 

The insurer argued that the insured had a duty in terms of the policy to disclose all material facts truthfully so that it could properly assess the risk. It submitted that by failing to disclose the additional losses, the insured misrepresented material facts relating to her risk profile. This created an unacceptably high risk according to its underwriting guidelines. The insurer submitted it would not have agreed to conclude a contract of insurance with the insured had it been aware of her loss history. 

Determination
In her final ruling, Deanne Wood said: “Short-term insurance contracts are entered into in good faith. In dealing with material misrepresentation under common law, a policyholder when requesting cover must make full disclosure to enable the insurer to properly assess the risk. An insurer has the right to avoid a contract of insurance if the proposer has misrepresented a material fact. 

“Having regard to the facts in this case, and the ordinary application of the law on the relevant issue, we find that the insured misrepresented material facts relating to her risk profile. We, therefore, find that the insurer was within its right to void the cover and reject the claim.” 

Writers thoughts:
We don’t know the exact circumstances regarding the placement of the cover, but can comfortably assume that there was no broker involved as a full claims history would have been passed onto the new insurer. The benefits of having a broker... Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts editor@fanews.co.za.

Comments

Added by Graham, 23 Jan 2020
On what possible basis was this referred to the Ombudsman in the first place?
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Added by CraigA, 23 Jan 2020
Why do people think that they are smarter than the insurance companies?

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