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Complaints decline as underwriting margins recover

23 May 2011 Gareth Stokes
Gareth Stokes, FAnews Online Editor

Gareth Stokes, FAnews Online Editor

Short-term insurers reported solid results through 2010 – a year during which the Ombudsman for Short-term Insurance (OSTI) received fewer complaints than 2008 or 2009. This fact merged at the OSTI Annual Report 2010 launch held in Johannesburg recently. The Ombudsman, Brian Martin, said his offices’ performance was encouraging against the backdrop of tough economic conditions and the pressures placed on both consumer and insurer in the short-term industry. Perhaps 2010 can be held up as a ‘model’ for how short-term insurance should work: complaints will decline provided insurers set sensible premiums, strive for reasonable payout ratios and aim for acceptable underwriting margins.

A second full-year decline

There were slight declines in virtually every statistic presented by the OSTI. A total of 8778 formal complaints were received during 2010 – down from 9144 the year before – and some way off the record 9763 complaints tabled in 2008. Martin offered a number of reasons for the declining trend. The first contributing factor is the general slowdown in economic activity, which led to a severe contraction in the South African motor vehicle sector. “There is a direct correlation between the state of the motor vehicle industry and the number of complaints received by the Ombudsman,” he says. Another possibility is that short-term insurers have significantly improved their internal complaints handling processes, with the result fewer complaints get as far as the OSTI.

The total rand value recovered for consumers through 2010 topped R130 million, some R6 million short of the record R136 million recovered the year before… And there were some incredibly large claims in the period under review! “In 2010 the office achieved the greatest single recovery in its history for a single complainant of R3.7 million,” observed Martin. “During December 2010 another complaint was successfully resolved resulting in a recovery for the complainant of R2.6 million!”

The bulk of the complaints handled by the Office still come from the personal lines motor (53.1%) space. Homeowners insurance – an area dominated by bank insurers – accounted for a further 19.31% of all complaints received. Miscellaneous complaints (16.69%), personal lines householders (5.71%) and commercial complaints (5.18%) make up the balance.

Time taken to resolve complaints still an issue

The OSTI closed 8992 files last year, but struggled to reduce their average turnaround time. In 2009 the average turnaround time was around 233 days versus the 225 days reported for 2010… Martin explained: “We have set a six month benchmark for complaints resolution, but due to the divergent models followed by our member insurers, achieving this model has been very difficult in practice…” But for someone paying motor vehicle instalments or battling a banks’ mortgage department this ‘wait’ for assistance is simply too long! Various steps have been taken in an ongoing effort to improve turnaround times including frequent meetings with insurers, the introduction of various incentives and the roll-out of a penalty system. Certain senior OSTI staff will also dedicate two days per week to so-called ‘six month’ cases.

Rewarding excellence in complaints resolution

The OSTI uses the annual results presentation luncheon as a platform to recognise those insurers that make the greatest commitment to the effective and timely resolution of complaints, in particular the application of the legal and equitable principles followed by the Ombudsman during the year under review. The Isabel Jones Ukusizana Award – first awarded in 2007 – is named after the late Isabel Jones who served as chairperson of the OSTI for many years.

The recipients of the award are determined based on the ‘scores’ assigned by the OSTI to each finalised case. “The scoring of individual matters has become an important function, with many insurers utilising these scores for a variety of purposes, including staff performance appraisal,” said Martin. He congratulated Auto & General Insurance as the winner of the 2010 Isabel Jones Ukusizana Award. The runners-up were Standard Insurance, followed by Relyant Insurance in third position.

Following various approaches from insurance stakeholders the award will be expanded from 2011. “The proposal was that we perhaps create three categories bearing in mind our members occupy very different positions in the insurance market in terms of their size and method of doing business… From next year we will have three awards to be divided into categories yet to be decided,” said Martin.

Editor’s thoughts: There have been a number of developments in the Ombudsman space in recent years… One of these is the Ombudsmen Customer Contact Centre (0860-OMBUDS), a joint initiative by the OSTI, Ombudsman for Long-term Insurance and FAIS Ombud to ensure complaints are filtered to the correct consumer body… Do you have frequent interactions with any of the above Ombudsmen? And have their respective complaints resolution processes improved over time? Please add your comment below, or send it to gareth@fanews.co.za

Comments

Added by Andr, 23 May 2011
Well done to Auto&General!!
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