Cutting through the insurance claims clutter
The conversation at insurance industry functions often turns to personal experiences of short-term motor claims. Not surprisingly, opinions vary from one person to the next. If you talk to the insured they inevitably complain about some aspect of the clai
Although I’ve been writing about insurance matters for a number of years I am still amazed at how many misrepresentations (known as lies in colloquial English) are made at both policy inception and claims stage. At the point of sale insurers fall over each other to offer the lowest premium with scant attention to exclusions and items not covered, while the insured answers important underwriting questions as guardedly as possible to ensure his premium is not inflated. At claims stage the role is reversed, with the insurer hauling out its list of exclusions while the insured does whatever is required not to contradict the answers provided when taking out the cover. There are none as inventive as the policyholder who believes they might not be covered for motor vehicle accident damage due to one or other transgression… And I’m sure anyone in the industry – broker or insurance claims assessor – has dozens of stories about false affidavits post accident.
Proof from the OSTI files
My opening tirade stems from a case study published in the April 2012 Ombudsman’s Briefcase, the official newsletter of the Ombudsman for Short-Term Insurance. The complaint relates to single vehicle accident which occurred in August 2010, when the insured’s son swerved to avoid hitting an antelope, and lost control of the vehicle. The insurer – identified as direct insurer Outsurance – rejected the claim on the grounds of regular driver misrepresentation. Were they correct in rejecting the claim? We’ll let you decide as the case unfolds.
As with most Ombudsman complaints the facts are presented from an insurer and insured view. We’ll begin with the facts as presented by the insurer, who advised that the facility and the risk incepted in December 2005 when the complainant insured a 2005 Ranger 2500TD. Upon submission of the claim it was established by the insurer that the son had been the regular driver of the vehicle since May 2009. During the assessor’s investigations a number of additional facts came to light (discussed briefly in bullet points below):
· There had been a previous claim in 2005, when the same vehicle was involved in an incident, and the driver was also a son of the insured.
· The complainant had contacted the insurer in May 2009 with the intention of adding his son as the regular driver of this vehicle and was advised to do so should his son be using the vehicle more often than anybody else on a monthly basis.
· Upon adding his son as the regular driver the monthly premium increased from R559 to R1 340… A 20% discount was negotiated by the insured and the premium reduced to R1 085.
· Two days after making this change the complainant phoned the insurer and advised that his son should be removed as the regular driver on the vehicle.
Post accident interviews with the son and occupants of the vehicle revealed that the son frequently used the vehicle including to school and back (Monday to Friday), to scout meetings (Friday evenings) and to various sporting events no Saturdays. He used the vehicle during school holidays too – and had gone as far as installing a sound system in the vehicle. “In light of all the evidence that was gathered by the insurance company they were of the view that there was a clear misrepresentation of the regular driver and therefore the rejection was sound,” notes the OSTI. “There was also a premium prejudice of 104.31%!”
And the successful defence...
The insured argued that Outsurance’s response was “confusing and disjointed, with misrepresentation and inaccuracies all done in an attempt to justify the rejection of the claim.” He did not contest that his son had phoned in the initial claim and was the driver at the time. But he was adamant that his son was only the secondary driver of the vehicle.
At this stage the insurer rejection appears reasonable… But the Ombudsman had other ideas. “During the investigation of this claim our offices suspected that there were various issues that weren’t properly canvassed and we therefore requested that the insurer provide us with all the sales conversations and the relevant interview that the assessor had with the complainant.” Based on these recordings the OSTI concluded that the insured had in all likelihood been “coached” by his legal representation prior to conducting the interview… Score for the insured? As it turns out, no! “During the assessor’s investigation the issue regarding the regular driver wasn’t canvassed correctly – and we were not satisfied with the evidence that the insurer had provided to rely on the rejection of regular driver,” they say.
The OSTI informed the insurer that it had not, on the facts on hand, sufficiently shown that there had been a misrepresentation of the regular driver in the matter… In addition, the insurer had not, on a balance of probabilities, provided the OSTI with sufficient proof that the regular driver had been misrepresented and had changed… After some ‘back and forth’ on the exact amount of the claim the insured accepted a settlement – calculated in full per the policy – from the insurer.
Is this a fair outcome for both insurer and insured?
The OSTI has a clearly defined role. As noted by the new Ombudsman, Dennis Jooste, their mission is to adjudicate disputed insurance claims in an independent, fair and economical manner based upon the law and where appropriate by the application of equitable principles. He adds that the OSTI should be perceived as neither pro-insurer, nor pro-consumer. Was the above decision fair? As an insured I am comfortable with the outcome. But I might not have been as comfortable had I been the insurer!
Based on the above case – and others I’ve discussed from time to time with insurers – the insured can do no wrong. The position seems to be that the insured will enjoy full cover regardless of misrepresentations at policy inception or claims stage. If all insurance disputes are judged along similar lines we must begin asking whether underwriting at policy inception – or conditions to insurance cover – are necessary at all.
Editor’s thoughts: The insurance broker is held up as a champion of consumer rights, willing to fight the insurer to secure a fair settlement for his or her client. And it seems this battle must take place whether the client is entirely honest or not… Does the pressure to secure an insurance payout create moral and ethical dilemmas at claims stage? Add your comment below, or send it to [email protected]
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