Complaints are on the rise as policyholders battle exclusions and delays

10 July 2024 Myra Knoesen

The Ombudsman for Long-term Insurance (OLTI) and the Ombudsman for Short-term Insurance (OSTI), now the National Financial Ombud Scheme South Africa (NFO), recently published their last joint annual report for 2023.

OLTI and OSTI jointly placed more than R386 million (R386 456 756) in the hands of complainants during the 2023 financial year. OSTI recorded payment of R102 644 365 as the monetary benefit and value for consumers who approached the office for assistance.

The statistics

Looking at the OSTI takeaways, OSTI ended the 2023 financial year registering 5.6% more new complaints and finalising 1.2% more complaints than in 2022. It ended the year with 12 188 registered complaints, compared to 11 542 in the previous year, and closed 10 534 complaints compared to 10 411 in 2022. 

Over the last two years, OSTI experienced an increase of around 24% in new registered complaints whilst maintaining the same adjudicative staff complement. By the end of the year, the average turnaround time (TAT) to resolve complaints was 142 days compared to 122 days in 2022. Without weekends and public holidays, the average TAT for last year was around 97 days.  

Of the 12 188 complaints registered, nine complaints were related to COVID-19; seven were SASRIA-related complaints arising from the civil unrest in Kwa-Zulu Natal in July 2021; 220 were related to power surge; and 167 related to the KwaZulu-Natal floods of April 2022. The earthquake in June on the East Rand of Johannesburg generated 97 complaints and 96 complaints related to storms and floods in Gauteng during December. Just over 16 000 enquiries and 67 446 telephone calls were received during the year. 

The majority of complaints

Around 40% of all complaints were generated from motor vehicle insurance with the majority of these complaints involving accident-related claims (64.7%) that had been declined on the basis of an exclusion in the policy. The predominant exclusions were a lack of due care or precaution in preventing or minimising the loss, especially in claims involving speeding, followed by misrepresentation or non-disclosure at the time of taking out the policy or during the term of the policy, and at claim’s stage. 

The second highest number of complaints, at around 25%, related to homeowners’ claims declined on the basis of policy exclusions. The majority of these claims related to damage caused by acts of nature (44.7%) and declined on the basis of gradual deterioration, lack of maintenance and wear and tear, followed by defects in design or construction.       

When it comes to Treating Customers Fairly (TCF) outcomes, 91.8% of all complaints closed in this period had identifiable TCF outcomes with the balance not having applicable TCF outcomes.  Each matter may have more than one applicable TCF outcome. Of the complaints, 48.48% were not confident that they were dealing with an insurer where the fair treatment of policyholders is central to the insurer’s culture, 25.2% did not feel that they were provided with a service from their insurer that was of an acceptable standard, 18.5% felt that they were not provided with products that performed as they had been led to expect and 10.8% felt that they faced unreasonable post-sale barriers when they wanted to submit a claim. 

More matters finalised by OSTI

OSTI recorded a resolved ratio, also known as an overturn ratio, of 16%, a decline of 2% compared to the 18% recorded in 2020, 2021 and 2022. The resolved/overturn ratio is an indicator of those complaints where the insurer’s decision or approach was changed by the office with some additional benefit to the insured. 

OSTI issued two final rulings against the same insurer. In both cases, the insurer agreed to abide by the rulings.  

OSTI achieved an average overall customer experience rating of 81 out of a target of 80 for 2023. Key performance indicators were derived from call handling, complaints registration and complaints handling statistics and feedback received in the form of surveys completed by complainants and insurers. 

Socio-economic trends

The majority of complainants fell within the 36-60 age range, making up 60.68% of the total. The 25-35 age group comprised 18.87% of complainants. Those aged 61 and above accounted for 16.10%. A small percentage (0.28%) were aged 18-24. 

Male complainants represented 63.09% of the total, while female complainants made up 36.91%. Gauteng leaded with 40.36% of the complaints, KwaZulu-Natal followed with 16.46% and the Western Cape accounted for 13.79%. 

A word from OSTI on the common issues

Because motor vehicle insurance accounted for around 40% of all the complaints, FAnews asked Peter Nkhuna, Senior Adjudicator: Non-life Insurance Division what common issues were observed in these complaints, and how insurers can better align their policies to address policyholder expectations and reduce disputes.

Looking at the common issues, Nkhuna said, “A large proportion (26% of complaints related to policy exclusions) related to the use of the ‘reasonable precautions clauses’ in policies to decline claims. This also related more specifically to speeding and tended to involve particular insurers. It also seems that the application of the clauses is without proper understanding of what needs to have occurred before the insurer would be entitled to rely on this policy provision to decline liability. Sometimes inadequate expert reports were used to justify the claim rejections, without being critically evaluated by insurers, where they simply took what the experts stated in their reports. Some insurers also have developed a cluster of related clauses that are lumped together, sometimes even where some of them may not be relevant. Others are just replications of others, meaning that proving or disproving one means that the others are also proved or disproved.”  

Insurers, he said, could improve by incorporating the OSTI’s feedback when making decisions, to avoid repeating the same misapplications.

“By also evaluating the reports received from experts and not merely relying on them at face value, quality decisions could also be reached by insurers. In other words, insurers must apply their minds when deciding on liability, and approving or declining claims. In complaints relating to commercial vehicles and goods in transit claims, we continued to see disputes regarding losses involving inadequately vetted and sometimes undocumented/ unlicensed foreign drivers that tend to come from one neighbouring country, that some operators use. It seems that even where insurers may have taken elaborate steps to make sure that operators comply with the law and policies, some operators simply ignore the requirements. Consumers seem to, therefore, be part of the problem regarding this aspect of complaints. Another minefield relates to mechanical warranty policies that often lead one to wonder whether they ever provide cover at all. Most of them are couched in very complicated terms where it is very difficult to establish whether one enjoys cover or not as there are often conflicting provisions throughout the policy where one provision grants coverage, but it is then subsequently excluded, limited or there are exceptions that may mean very little protection is offered to the consumer,” he added.

OSTI’s stance on policy exclusions and TCF

When it comes to the issue around policy exclusions, Nkhuna said, the exclusions, exceptions and limitations are generally clearly articulated in policy wordings and conveyed in other interactions. “The problem seems to relate more to the inclination to attribute most damage to lack of maintenance, defects, gradual deterioration and wear and tear, even where this may be on questionable evidence. When required to substantiate the findings, evidence is not always forthcoming, available or in existence. For example, in most cases of damage to floor tiles, the default response seems to be that it must be due to incorrect installation, fitment or application, often based on purely theoretical explanations,” he said. 

FAnews asked Nkhuna what the key areas where insurers are falling short in TCF outcomes are and he said, “The sales processes and interactions seem to sometimes be geared toward making a sale and meeting compliance requirements than ensuring that consumers understand the products they buy and the terms and conditions thereof. Poor service issues abound. However, the OSTI has historically not been able to assist regarding this aspect of complaints. Perhaps in the new dispensation in the era of the National Financial Ombud (NFO) Scheme, this might be something to be addressed through the newly acquired powers to make compensation awards.” 

In his concluding remarks he said, “Insurers must always remember that the correct approach and attitude is to pay valid claims and only decline invalid claims. Difficult as it may be to achieve this, it must always be the forefront consideration.” 

Writer’s Thoughts

The figures speak volumes about the challenges and successes in consumer advocacy within the insurance sector. With over R386 million disbursed to complainants in 2023, and amidst a backdrop of increasing complaints and evolving socio-economic trends, the focus remains clear: insurers must prioritise transparency, fairness, and diligent claim handling to uphold trust and meet policyholder expectations effectively. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me -

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