A window to the world of insurance claims handling
The complaints most often levelled at the financial services industry can be traced back to a lack of transparency. Providers are criticised for their “black box” approach to product development which makes it difficult for both intermediary and end-consu
Intermediaries, in turn, are lambasted for putting their financial interests ahead of their clients by “churning” their book or recommending product with higher fees and commissions (often at the provider’s behest). The FAIS Act, Fit & Proper Requirements for Financial Services Providers and Conflict of Interest regulations go a long way to bringing errant intermediaries into line… And the pending Treating Customers Fairly (TCF) will force financial institutions to lift the lid on certain of their design practices. Until such time all insurers operate under TCF conditions one of the best ways to look “under the hood” of their policy design is to consider the myriad cases publicised by the industry Ombudsmen. The Ombudsman’s Briefcase June 2012, the official newsletter of the Ombudsman for Short-Term Insurance (OSTI), provides invaluable insight into how short-term insurers handle claims.
An unfortunate “grey” import ruling
In the first case brought to the Ombudsman the insurer rejected a motor vehicle accident claim on the basis the insured had not informed it that the vehicle under cover was a “grey” import. Website wikipedia.org describes “grey” imports as “new or used motor vehicles and motorcycles legally imported from another country through channels other than the maker’s official distribution system.” (Grey or “parallel” imports are also popular in the household appliance space). The vehicle on risk with the insurer was a Lexus LS400 and the fact that it was a “grey” import was not in dispute. Could the insurer rely on the non-disclosure of the vehicle’s import status to refuse the claim?
Some of the parts required for the post-accident repair had to be imported. While we assume a similar situation would have held for an official import, the insurer decided that the cost of repairs to the vehicle were prohibitive due to it being a “grey” import. They argued that they would not have accepted the risk had this fact been disclosed upfront. As in many of the cases that end up at the OSTI some compromise was required. The Ombudsman’s office recommended that the insurer settle the claim on the basis of the actual costs of the spare parts and the normal applicable labour rates… Upon the insured obtaining a repair quotation for R62000 the insurer wrote off the vehicle and settled the claim, making deductions for the salvage, which the insured kept.
FAnews was surprised that this case landed on the Ombudsman’s desk given the amount of “grey” product in circulation in South Africa. We have certainly never been asked whether our vehicle is “grey” or not by any of the insurers or brokers we have sought cover from! Most reputable auto repair shops will undertake repairs on such vehicles… It is also worth noting that just about every local vehicle manufacturer relies on imported parts to carry out post-sales repairs.
Make sure your clients meet policy requirements
The second case “lifted” from the latest Ombudsman newsletter illustrates how important it is for your clients to meet the stipulations in their short-term policies. The complainant submitted a claim against their insurer for cash stolen out of a safe during a burglary. The perpetrators used an angle grinder to “crack” the safe. “During the assessment of the claim, the safe was inspected in order to determine its SABS categorisation,” notes the Ombudsman. No SABS markings were present, so the assessor “graded” the safe by comparing its construction – the safe door measured 10mm thick and had one lock – to the published SABS categories.
After the assessment the insurer determined that the installed safe did not meet the SABS grading requirements as set out in the policy, and paid out the R2500 cash sum insured under such conditions. The insured was unhappy with the decision – more specifically with the ability of the assessor to “grade” the safe – and laid a complaint with the OSTI. “The complainant was advised that the assessor’s evidence could be relied on in substantiation of the insurer’s settlement of the claim,” concluded the Ombudsman. The complainant failed to respond to the Ombudsman’s subsequent request for manufacturer specifications of the safe and the insurer’s settlement was upheld.
The lesson from this complaint is to ensure that your clients comply with specific requests in their insurance policies. Remind your clients at annual review about security, tracking and garaging requirements for their vehicles, as well as alarm, armed response and alarm testing requirements for their household goods cover.
Editor’s thoughts: A comprehensive short-term motor vehicle insurance policy should compensate a vehicle owner for loss caused by theft, hi-jacking or accident. There is no reason a “grey” import should cost more than an official import to repair – and our opinion is that repairs done outside the dealer network may even be completed at a lower cost. The insurer’s decision to disallow a claim based on the cost of repairing a “grey” import is therefore disingenuous. Have you ever experienced difficulties at claims stage due to a motor vehicle (or any other item) being considered a “grey” import? Add your comment below, or send it to [email protected]
Comments