FAIS Ombud nails short-term insurer
What happens when a financial adviser takes on a short-term insurer? The financial services industry got their answer when the FAIS Ombud, Mr Charles Pillai, ruled in the matter of Mr Sabastian Chetty (the complainant) versus Orange Insurance Limited (the respondent). Chetty approached the FAIS Ombud to encourage his insurer to pay repair costs, towing charges and storage costs to secure the release of his vehicle. The respondent had authorised repairs on the vehicle but failed to pay when the repair costs were invoiced.
Chetty took out comprehensive insurance cover on his 2008 Ford Focus. His broker, Guardian Finance, placed the business with Orange Insurance Limited. On 12 December 2008 the claimant’s vehicle was damaged in an accident and a claim submitted. Early in the New Year, 6 January 2009, an assessor concluded that the vehicle was a ‘write-off’. This would usually be enough to trigger the claim settlement process. In this event Orange Insurance decided otherwise.
Repair rather than write-off
Instead of declaring the vehicle uneconomical to repair they notified the complainant of their intention to re-assess it. A second assessor concluded that the vehicle could be ‘economically’ repaired. Technostar Auto Body Repairers duly undertook the repair and despite repeated efforts was unable to secure payment from the respondent. Their recourse was to withhold the vehicle from Chetty until the repairs were paid in full. The stand-off between Technostar and Orange Insurance prompted Chetty to approach the FAIS Ombud on 12 February 2009.
The office of the FAIS Ombud had to play hardball to secure a response from Orange Insurance, repeatedly reminding them of the Office’s jurisdiction in the matter. They waited until the 27 November 2009 before an Orange Insurance director issued a statement. This initial statement was further expanded on in an email communication with the Office on 2 December 2009. An excerpt from the email reads: “Orange Insurance Limited (OIL) fully understands your role as the FAIS Ombud. However, OIL and its legal team have been engaged with the Financial Services Board (FSB) since February 2009, to resolve the issue of outstanding claims between ourselves, Fleetsure and Zurich.”
The FSB and FAIS aren’t one and the same
This defence was dismissed out of hand by the FAIS Ombud who had already warned the respondent not to confuse the independent roles of the FSB and the Office. Pillai concluded that Orange Limited’s ongoing dispute with the FSB had no direct bearing on the issue at hand! “Of cardinal importance is that the respondent accepted liability for the complainant’s damages and has not furnished this Office with any logical or acceptable explanation for its failure to honour its undertaking,” said Pillai. “Based on the facts at my disposal, I have no doubt that the respondent is liable for the complainant’s damages. The complaint should be upheld.”
Pillai ordered Orange Insurance to pay R101 949 to cover the cost of repairs to the motor vehicle. He also awarded R2 000 for towing charges and storage at the rate of R190 per day from 31 March 2009 until the vehicle is released. In his determination Pillai noted there were a string of similar cases lodged against Orange Insurance. Each case was similar in that Orange “failed to pay for its admitted liability for damage caused to complainants’ vehicles as a result of accidents.” Pillai said the determination was probably the first in a series that would follow against the respondent.
Ombud assumes special powers
The unique aspect of this FAIS Ombud determination stems from the fact Orange Insurance was not a member of a recognised scheme as contemplated in Section 11 of the FSOS Act. This required that “the FAIS Ombud, in his capacity as Statutory Ombud in terms of Section 13, had to assume jurisdiction over the respondent as provided for in Section 14 of the FSOS Act.”
Editor’s thoughts: There’s nothing complicated about short-term motor vehicle insurance. Cover is written – claims are lodged – assessors are sent out to determine the extent of the damage – and underwriters decide the appropriate course of action. But administrative errors, and subsequent attempts to ‘fix’ them, often leave the insured out of pocket. Have any of your clients struggled to collect their repaired vehicles due to non-payment by insurers? Add your comments below, or send them to [email protected]
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