Third party claims and third party recoveries

Increasingly, consumers have been complaining that they are not treated fairly by insurers regarding third party claims, including policyholders and uninsured consumers. Often consumers, including policyholders, find themselves in the middle of two insurers.

Many consumers have also complained that they have no avenue for recourse in this area, as the Ombudsman for Short-term Insurance (OSTI) does not have jurisdiction over third party claims, and reportedly does not intend to consider adding this to its mandate.

In addition, Government has noted that their perception is that short-term insurers, especially in the motor insurance environment, do not follow fair market practices.

Treating Customers Fairly (TCF) will be implemented shortly. Not only will insurers have to comply with TCF in future, treating customers fairly should be, and will be, about more than just complying with TCF principles. In addition, the TCF principles will apply to all consumers.

Others have also raised this topic as an area that the industry needs to address. Some insurers have also spoken out in recent public insurance forums against the current way insurers in general deal with third party claims and recoveries. Third party recovery agents have contacted SAIA in the last year or two with regards to difficulties being experienced by them to make recoveries on behalf of the insurers that contract them. This is from other insurers regarding whether they are signatories to the Knock For Knock agreement or not.

Brokers have also commented on the fact that their clients often find themselves in difficult positions regarding third party claims, because of the fact that their insurers are often perceived to not act in good faith regarding third party claims.

It is therefore clear that this environment is currently fraught with undesirable practices, which are detrimental to the image and reputation of the short-term insurance industry.

In the meantime, due to the resignation of most of the signatories to the South African Knock for Knock Agreement, SAIA has decided to cancel it with effect from the end of September 2013, which now contributes to the urgency of addressing this matter.

It is acknowledged that the third party claims environment is naturally a confrontational one, in which the various parties have to come to some agreement about fault and liability. It is also an environment in which legal representatives are involved, and the law of delict is followed. Furthermore, there is currently no recourse avenue available to uninsured third parties other than the South African legal system.

 

Current customers’ main challenges are the recovery of their excesses if they are not at fault, as well as the threat of legal action against them. In addition, the time it often takes to settle these issues, is problematic for customers.

 

Third party environments with regard to customers and future customers made SAIA decide to form a Third Party Claims and Recoveries Task Team, which has met on a number of occasions, where the matter was discussed intensively.

In terms of the task team’s mandate, it was decided that the best way to address this matter, was to include a separate section to the SAIA Code of Conduct, which will also include potential solutions of the lack of recourse to uninsured third parties.

The drafting of this new section to the SAIA Code of Conduct, is currently under way and it is hoped to finalise same shortly after it has gone through the normal approval process.