Long-Term Insurance Ombudsman – towards greater transparency
Yesterday the Long-term Insurance Ombudsman announced it would begin publishing its determinations. In their press release, ombudsman Judge Brian Galgut said (after a rule change) he was obliged to make public the name of the long-term insurer against which the determination was issued along with a summary of the case and reasons for the ruling. It’s a decision which is long overdue. Industry peers like the Ombudsman for Short-term Insurance and the FAIS Ombudsman have been doing so for some time. But does this go far enough? We’re slightly confused that a mechanism created to resolve consumer disputes does so much to protect those trampling on their rights.
Transparency in the Ombudsman’s best interest
Both insurance Ombudsmen (short and long-term) have to ‘resolve’ thousands of complaints each year. But the bulk of these complaints are settled without the need for an official ruling. The Ombudsman for Short-term Insurance for example ruled only seven times in 2007 (out of 9 083 complaints) and once in 2008 (out of 9 763 complaints). The way the remainder of the cases are dealt with is (in our opinion) the reason these offices are bombarded with so many cases. The insurer escapes censure by ‘resolving’ the complaint during the initial stages of the Ombudsman investigation.
That’s why the Ombudsman for Short-term Insurance publishes a 37% ‘overturn’ rate in its 2008 Annual Report. Almost four in ten of the consumers who bring complaints to this office have been forced to do so by belligerent insurers who most likely know the outcome when they initially reject the claim. The number from the Ombudsman for Long-term Insurance is equally concerning. “On average 44% of all complaints are resolved wholly or partially in favour of complainants,” says Galgut. The majority of complaints are resolved “by mediated settlements” and don’t require a binding determination. According to Galgut “the aim of the provisional determination is to provide the losing party with the opportunity to furnish any facts or submissions that have not previously been presented and that might have an impact on the outcome of the case; but insurers generally accept the provisional determinations and offer settlements in terms thereof.”
This process allows transgressors in the product provider space to delay using their ‘get out of jail free’ card to the very last step in the complaint resolution process. We suggest both Offices would be doing consumers a huge favour if they published comprehensive statistics on all cases brought to their offices – including the names of those insurers whose initial decisions are so frequently overturned.
A victory for all stakeholders
Instead of acting as a safety net for consumers, the Ombudsmen are being used by insurers. Claims are rejected even if the insurer knows the Ombudsmen will side with the consumer. The reason – countless consumers will simply accept the decision to decline the claim and not take the matter further. And those that do will have to wait months for a decision to be reached. The Ombudsman for Short-term Insurance is already sitting at an average 178 days for complaint resolution!
Publishing complete statistics will help all parties. It will encourage the insurers to apply the rules of fairness and equity at claims stage rather than waiting a few months and doing so with the Ombudsmen looking over their shoulders. It will assist the Ombudsmen by removing thousands of cases from their books. And it will benefit insurers who will receive the cover they’ve been paying premium for without the hassle of taking the matter further.
Editor’s thoughts: An insurance complaint should only reach the Ombudsman once both parties have made every attempt to resolve the issue. If between 30% and 40% of insurers are capitulating during the complaints resolution process then there’s clearly something wrong with the resolution mechanism. What would you suggest the Ombudsmen do to reduce ‘chance taking’ at complaints resolution stage? Add your comments below, or send them to [email protected]
