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Declined claims the biggest cause of complaints

25 May 2021 Myra Knoesen

On 18 May the Ombudsman for Long Term Insurance (OLTI) and Short Term Insurance (OSTI) released the 2020 Annual Report.

Key figures in short term

In discussing the short term insurance industry figure Edite Teixeira-Mckinon, Chief Executive Officer: Ombudsman for Short Term Insurance said, “Within OSTI, we saw clear evidence of cohesion, togetherness and empathy in response to the COVID-19 challenge and our operational performance during 2020 is testament to this.”

“In 2020, OSTI registered 11 095 new complaints, 7% more than in 2019, and closed 10 805 complaints, 17.9% more than in 2019. Of all the complaints registered in 2020, 786 complaints related to COVID-19, with 562 relating to business interruption insurance and 224 relating to travel insurance. COVID-19-related complaints comprised 7% of all the complaints registered in 2020. The highest number of COVID-19 complaints were registered during June, July and August. A new sub-category of complaints was added to our case management system to ensure total visibility of these complaints and a dedicated team of assistant ombudsmen was appointed to handle them in a timeous and consistent manner,” added Teixeira-Mckinon.

“We started the year with an average turnaround time of 141 days and by the end of the year the turnaround time decreased to 136 days. The six month list, which is a list of complaints outstanding for six months and longer, decreased from 739 in January to 575 at the end of December,” continued Teixeira-Mckinon.

OSTI, according to Teixeira-Mckinon, recorded a monetary benefit and value to consumers in the amount of R119 548 901. The benefit/value to consumers who approached our office increased by approximately R22 million from 2019 to 2020.

 

OSTI scored an overall customer experience rating of 76% out of a target of 80%. This rating increased by 1% from 2019.

Nature of short term complaints

The majority of these complaints, at 36%, related to motor vehicle disputes. This was followed by homeowners’/building disputes at 21%, commercial at 14%, and household contents at 5%. The balance of 24% is related to other types of cover and general policy queries.

The complaint trends in 2020 were influenced, in part, by the nationwide lockdown and government regulations. For instance, the number of motor vehicle-related complaints was 12% lower than in 2019. It was the lowest reported in the last five years. Commercial complaints increased by 5%, with the majority relating to business interruption claims.

At 73%, accident-related claims remained the highest number of complaints considered by OSTI in this category. Warranty and mechanical breakdown claims comprised 11%. Theft and hijack claims comprised 7%.

In 2020, 16% of the total number of motor vehicle disputes were resolved in favour of the insureds, and OSTI put R48 908 741 back into their pockets. OSTI considered a total of 2 100 homeowners’ insurance disputes in 2020, 15% more when compared to 2019. The primary cause for the complaints, at 47%, was the rejection of claims based on policy exclusions for damage caused by defective design, construction or workmanship, wear and tear, and lack of building maintenance. This cause for complaints increased by 17% in 2020 and continues to be the main basis for consumer dissatisfaction in homeowners’ insurance coverage.

Theft and burglary claims comprised 55% of complaints considered by OSTI under this category. This was a 17% decline compared to last year’s figure. Complaints relating to damage caused by power surges increased from 3% in 2018 to 6% in 2019. Last year 11% of household contents disputes related to power surge claims. This cause of damage will remain a concern for consumers during periods of load-shedding.

The total number of commercial complaints considered by OSTI in 2020 surged by 62% when compared to 2019. Motor vehicle complaints comprised 21%. This was a 12% decline when compared to 2019. Building complaints also declined from 23% in 2019 to 18% in 2020. In 2020, 22% of commercial insurance complaints related to business interruption claims. The majority of these, 15%, concerned COVID-19-related business interruption.

Sixteen percent of commercial insurance disputes were resolved in favour of the insureds’ complaint and OSTI recovered R38 909 691. These figures do not reflect the outcome of the business interruption complaints.

The remaining complaints relate to various types of insurance cover and products including personal accident, water loss, travel, all risks, mobile devices, legal expenses, hospital and medical gap cover. This category, overall, comprised 25% of the formal complaints considered by OSTI in 2020. Disputes relating to mobile device theft and accidental damage were the highest in this category, at 30%. COVID-19-related travel insurance disputes comprised 7% of all these disputes. Twenty nine percent of the total complaints in this category were resolved in favour of the insureds’ complaint and OSTI recovered R12 245 301.

Key figures in long term complaints

Jennifer Preiss, Deputy OLTI said, “COVID-19 and the lockdown dominated our lives and work. This reflected in our complaints and the work pressure we experienced. A similar trend was experienced by many ombudsman offices – with a slowdown in the initial lockdown period and an expected surge of complaints in the second half of the year.”

“We received 14 198 written requests for assistance in 2020, which was an increase of 2 283 or 19% over the 11 915 received in 2019, which included 6 756 chargeable complaints - this was an increase of 10% over the 6 107 of 2019. This is the highest number of written requests the office has ever received. A total of 6 512 complaints were finalised. This included 3 624 full cases that were finalised (which is 66 more than the 3 558 in 2019), of which 31.73% were resolved wholly or partially in favour of complainants, and 2 888 transfers were finalised,” continued Preiss.

Transfers increased to 4 782, from the 4 051 in 2019. Insurers managed to settle 1 373 of these directly with complainants. This amounted to 28.7% which is consistent with 28.06% in 2019, and 28.6% in 2018. Reviews increased to 1 342 from 1 293 in 2019.

There were 456 complaints that were directly related to COVID-19 or to the lockdown. The majority of these (36%) were in respect of credit life benefits, which is a very different picture from OLTI’s overall complaints where credit life benefits make up only 9% of cases.

Declined claims are still the biggest cause of complaints, with a slightly higher percentage of the total complaints than in 2019.

R177.9 million was recovered for complainants in the form of lump sums. The amount of compensation awarded to complainants in terms of Rule 3.2.5 amounted to R817 970 in 208 cases, as compared to the R874 286 in 190 cases in 2019.

Nature of long term complaints

“Given the impact of COVID-19, it is not surprising that there was an increase in complaints about retrenchment and loss of income benefits. Many policyholders could also not afford to pay premiums either as a result of loss of employment or income and this led to lapsed policies. Although some insurers provided premium relief of one kind or another, this was not universal, and the relief packages were not all equally generous. Insurers, some more so than others, also struggled with service delivery during remote working conditions. This led to complaints, particularly when claimants were desperate to have claims paid, e.g. under funeral policies,” said Preiss.

“Premium reviews have continued, and complaints are increasing. The reviews leave the policyholders with the difficult option of high premium increases or substantial reductions in cover. We are also receiving an increasing number of complaints where policyholders or beneficiaries were not aware or did not understand that the policy that was bought offered restricted cover, in that it only provided accidental cover. These policies are generally sold by means of direct marketing, without advice. It can lead to disappointed expectations at claim stage,” concluded Preiss.

Writer’s Thoughts:
It is interesting to see the statistics, during COVID-19, reflected in the complaints. Declined claims are still the biggest cause of complaints. What do you think contributes to this? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.

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