Short-term industry still battles to reduce complaints

02 June 2015 Jonathan Faurie
Jonathan Faurie, FAnews Journalist

Jonathan Faurie, FAnews Journalist

Hot off the heels of the Annual report of the Office of the Long-Term Ombudsman, the Office of the Short-Term Ombudsman (OSTI) has released its annual report. The key question we need to ask is: are we as an industry working towards Treating Customers Fairly (TCF) principles?

The short-term industry does contribute significantly towards the insurance industry’s overall gross underwritten premium. And because of the fact that there are a lot of motor claims happening in the industry every day, one would naturally expect OSTI to be busier than its long-term counterpart. But is there an improvement in the performance of short-term industry?

Looking at the statistics

If we look at the statistics released by OSTI, some may argue that we are nowhere close to an improvement. Since 2010, there has been a steady increase in the rate of formal complaints received. If we isolate three years over the past six year period – 2011, 2013 and 2014 – we can see that the increases have actually been significant. In 2011, OSTI received 8 969 complaints. This increased to 9 368 complaints in 2013 and 10 253 complaints in 2014.

While this statistic has seen a steady increase, there has been a fluctuation in the Rand value of complaints resolved in favour of the insured. If we isolate the same three years, the OSTI recovered close to R118 million for clients. In 2013, this number pushed R119 million while this decreased to about R116 300 000 in 2014.

In 2011, it took the industry an average of 223 days to resolve a case, this decreased to 111 days in 2013 and there was a drastic decrease in 2014 where it only took 89 days to resolve a case.

The Ombud is also performing well in the number of files it manages to close within a six month period. In 2011, the Ombud only managed to close 52% of the files on its books. This increased to 87% in 2013 and to an impressive 95% in 2014.

Notable performers

The final statistic we need to look at is the sectors within the short-term industry that are contributing the most towards complaints. The motor industry is the major contributor with 46.9% of total complaints within the sector. This is followed by homeowners, which contributed 20.9% towards the industry’s complaints, and householders which contributed 8.2% towards the industry’s complaints.

While direct insurance is growing its influence on the short-term industry, it is still an industry that is dominated by intermediated players. So who contributes the least towards complaints? The average number of complaints contributed by intermediated insurers (as taken over the industry’s largest players) is 6%. The average number of complaints contributed by direct insurers (as taken over the industry’s largest players) is 4%.

What’s even more interesting is the fact that the intermediated insurer who contributed the most towards complaints in the industry accounted for 7.10% of the total complaints received by OSTI. The comparative number in the direct space is 5.94%.

A word from the Ombud

While the increase in the number of complaints may seem alarming, it also may not be a true reflection on the performance of the industry. Dennis Jooste, the Ombudsman for Short-Term Insurance, says that one of the factors that is definitely playing a role in the high number of complaints is economic stress. “Some consumers are filing complaints with the OSTI more out of hope than conviction that they have been treated unfairly,” says Jooste.

He adds that another factor may be the effect initiatives such as TCF are having on the industry. Some insurers may be battling to align with TCF principles while some consumers may not know the legality behind the principles of TCF. 

Editor’s Thoughts:
While TCF is a work in progress, and will take a while for companies to implement fully, the Financial Services Board (FSB) does expect companies to start imbedding TCF outcomes into their business. The fact that complaints are increasing in the short-term sector may suggest that improved customer treatment is a bit further off than the FSB hoped the industry to be? Or could it be that consumer education is working? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts



Added by Johnn Johnston, 02 Jun 2015
I can quite understand why consumers get annoyed with insurance companies and intermediaries. I recently insured my Harley with Quick sure through African Eagle.

I requested a quotation which I received and I decided I was not going to take the "Tyres for Life" benefit. I sent the form in indicating that choice very clearly and I signed for a premium of R 373,42 per month. With the tyres for life benefit the premium would be R 400 plus.
The first debit order went through for the higher amount and I checked my policy document and all me emails and found that the policy had indeed been issued with the tyre business included.
I sent an email to the people concerned and insisted that the error be fixed and that I be refunded. The error was fixed, I received a new schedule but have never received a refund, and not even a comment with the new schedule like "sorry, we made a mistake". Now I have to decide, do I expend all the energy to pursue the matter to retrieve the excess premium I paid? I decided I have more important things to do looking after my life and investment clients. But I have in the meantime told about 5 other Harley owners to be very careful of this insurance option because "they are don't care and skelm".

Kind regards
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Added by Ayanda, 02 Jun 2015
Dear Jonathan, did you not read the OSTI's press release?:
"The number of complaints received per 1000 claims received by insurers remains a constant three per 1000 claims submitted to insurers during 2014. Furthermore, complaints resolved with some additional benefit to the
consumer reduced to 31% of total complaints,
showing a continuing decline over the past few years. In relation to the decline in what is called the overturn ratio, it was interesting to note that the Ombudsman for Long-­‐term Insurance last week reported a similar trend."
Therefore, the question under your "Editor's Thoughts's" is nonsense. Complaints are not increasing in relation to the number of policies out there or even in relation to the number of claims received by insurers. In addition, more complaints are from chance-takers that ever before, encouraged to complain no doubt, by the fact that they are literally told to do so in terms of what is now required to appear in all letters of rejection.
Are you for this industry or ag'in it, old chap?
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Added by Barry Pringle, 02 Jun 2015
I would like to see more complete statistics before drawing comparisons between direct and intermediated markets. For example the size of the portfolio could have quite an influence on numbers of complaints submitted. I believe one of the major contributors to insured's finding their policies don't provide the cover they need is the general obsession with cost. So many people think they have "good" insurance because it's cheap, but unfortunately cheap insurance and wide cover are very seldom found together! The industry is being walloped with TCF principles, but isn't it time the customers started applying their minds to the quality of the product they are buying? Would I expect a R500 suit to give me the same "service" as a R5000 suit?
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