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Ombudsman reports decrease in complaints against SA short-term insurers

25 May 2016 Easvarie Naidoo, SAIA
Easvarie Naidoo, Legal Manager at SAIA.

Easvarie Naidoo, Legal Manager at SAIA.

The Ombudsman for Short-Term Insurance (OSTI) last week revealed a favourable decrease in complaints received against South African short-term insurers during 2015 compared to the previous year. The total number of complaints decreased by 4.5% to 9 784 in 2015 from 10 253 in 2014. In addition to the decreasing number of complaints recorded, the report also reveals a decrease in the overturn rate from 30% in 2014 to 26.73% in 2015.

According to Easvarie Naidoo, Legal Manager at the South African Insurance Association (SAIA), these statistics highlight the short-term insurance industry’s commitment to the principles of Treating Customers Fairly (TCF), as well as its adherence to the SAIA Code of Conduct.

“This general decrease in complaints and overturn rate is very positive for the industry. The OSTI also reported a constructive claims-to-complaint ratio, which remained constant from last year at 1000:3. This means that for every 1000 claims submitted to insurers, there were only three complaints made against insurers,” she explains.

In general, the majority of complaints received during 2015 remained motor-related (48%) followed by miscellaneous (19%), homeowner’s policies (18%), household content’s cover (7%) and commercial insurance (8%).

According to the OSTI’s report, the decrease in overturn rate to 26.73% could be attributed to various factors: The Treating Customers Fairly (TCF) initiative by insurers, coupled with the incentive to improve services following the publication of insurer statistics in recent years has led to a continued push for more fair-minded customer treatment, which would explain the general improvement of the overturn rate.

In addition to this, customers who are facing financial difficulties as a result of the economic downturn may be motivated to submit complaints to the OSTI in the hope that they may receive financial compensation rather than out of the conviction that they have been treated unfairly. “The OSTI rejecting these claims will have an impact on the overturn rate,” says Naidoo.

“In South Africa’s tough current economic climate, it is essential that we continue to promote the value of short-term insurance and make use of the sound recourse mechanisms that we have in place for consumers,” Naidoo adds.

Naidoo also draws attention to certain areas that the OSTI has highlighted as requiring additional consideration. “Policy drafting has been raised as an area of concern and should therefore be addressed by the industry. Firstly, policy documents, sales scripts and written proposals too often contain unclear and ambiguous clauses that are difficult for the consumer to understand. There are also problems with insurers failing to comply with the Policyholder Protection Rules, particularly in relation to furnishing concise details about policy exclusions, first amounts payable and the like.

“The onerous wording of travel insurance policies in emergency situations was of specific concern, particularly when an insured is traveling abroad. Other policies highlighted in this respect were motor warranties and cell phone policies. The OSTI reported a general lack of consumer understanding as to the precise nature of the motor cover provided, as well as a general misunderstanding around the concept of a specified Subscriber Identity Module (SIM) card having to be used with a particular handset at the time of loss,” she says.

“While the industry should be commended for the evident progress in terms of customer treatment, it is important to stay committed to continuously improving our performance and service offering. This can be done by adhering to the SAIA Code of Conduct and ensuring, through clear and simple communication, that consumers fully understand the various aspects of their short-term insurance policies,” Naidoo concludes.

 

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