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Staff retention issue slows delivery at Short-term Insurance Ombudsman

26 March 2009 Gareth Stokes

The Office of the Ombudsman for Short-term Insurance (OSTI) presented its 2008 Annual Report at a function in Johannesburg yesterday. During the latest period the office recovered R113m (a 28% improvement on the previous year) for unhappy short-term insurance consumers. Ombudsman Brian Martin’s presentation was a carbon copy of the previous year. The trends and challenges mentioned were identical!

But before we isolate some of the statistics we wanted to find out how OSTI achieved such a massive increase in recoveries. Martin identified four contributing factors. These include “the introduction of the principle of proportionality in settlements, stricter enforcement of the provisions of the Policyholder Protection Rules, an increase in the volume of complaints received and the higher quantum involved per complaint.”

Education remains a major stumbling block

The total number of complaints received by the office increased 7.48% to 13 409, though not all cases fell within OSTI jurisdiction. And despite the volume of cases finalised during the period, only one ruling was made. Martin welcomed the improvement, noting that it “reflects, to a large extent the better understanding which exists as to the approach adopted by the Office to many common problems.” Of course there were still many ‘common’ differences of opinion between the insurers and OSTI which will have to be resolved going forward.

Martin observed that the number of complaints would be significantly reduced if insurance consumers better understood their obligations in terms of the policy. He mentioned in particular the misunderstandings around the consequences of non-compliance with policy conditions. A large number of complaints stem from rejections of theft and burglary claims. “We urge consumers to make sure they read and understand the conditions of the policy contract before they agree to the terms,” said Martin.

There were also some interesting developments around complaint resolution processes during the year. The OSTI board met to discuss requests by insurers to create an appeal mechanism against formal Ombudsman rulings. They determined this would not be appropriate and the status quo was maintained. Limits for commercial disputes were raised slightly. Commercial policy holders with turnovers less than R10m per annum can lodge complaints with the Ombudsman, with the limit on each claim raised to R1m.

OSTI staff turnover a major concern!

During his 2007 presentation Martin observed that staff turnover had contributed to the increase in turnaround time on individual cases. He hoped the staff complement of 28 members would address the backlog through 2008. But things don’t always work to plan. Staff retention remains a major issue and Martin notes that the only face he recognises from his first day as Ombudsman is that of his deputy, Hendrik Viljoen. The result is that the average case takes 178 days to resolve.

During the address it emerged that each OSTI staff member had to close 100 cases a month to stay ahead of the game. Although FAnews Online is not familiar with the Ombudsman’s budget limitations, we suggest an increase in head count is in order. Alternatively the Ombudsman should lash out at the short-term insurers who are abusing his office to delay claim settlement.

Editor’s thoughts: The statistic that grabbed our attention at the 2008 Annual Report presentation is the so-called overturn ratio. Insurers reverse or alter their initial decision for four in 10 complaints brought to the Ombudsman! What does this overturn rate say about the short-term insurers’ commitment to fairness and equity? Add your comment below, or send it to gareth@fanews.co.za

Comments

Added by Lemming, 27 Mar 2009
The sad bit is that most of these overturned claims were repudiated correctly in terms of the insurance contract. The motivation for paying the claim is often due to extraneous factors like client education, perceived fairness of the contract (from the client’s side!) and “bad” publicity for the insurer. My advice if you want a non-claim paid – Act stupid and shout loudly.
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Added by Jaybee, 26 Mar 2009
In the good old days reputable insurers looked for reasons to pay claims but nowdays insurers look for reasons NOT to pay claims.
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Added by david, 26 Mar 2009
Who BENEFITS FINANCIALLY from declining claims "in error, 40% of the time"? . It irritates me that the companies are "profiting" IN EXCESS of their own actuarial risk-models. Time to force the GLUTTONS on an enforced DIET...by penalising those companies with an error rating of above, say 20%.
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