Insurers brace for administrative onslaught through 2011
It seems every New Year begins with a bang. The heavens opened over December and January, both here and abroad. In South Africa the Vaal River was breaking banks for the umpteenth time – laying waste to holiday homes in the Vanderbijlpark area. Meanwhile in Australia, an area equal in size to Germany and France was under water too! Short-term insurers and insurance intermediaries will have their hands full processing damage claims due to fierce storms, flooding and related incidents. But that’s not all they’ll be busy with…
From 1 January 2011 both long and short-term insurers will have to implement the latest set of Policyholder Protection Rules (PPR), published 17 December 2010. To find out what these rules entail we scanned through a “newsflash” form law firm Deneys Reitz, who says insurers will have to up their game through 2011.
Personal policyholders get more protection
Short-term insurers will have to apply the rule changes to personal lines policies (where the policyholder is a nature person insuring personally and not their businesses. Deneys Reitz took a look at some of the implications.
One of the important changes is to the “time limit” clause in existing policies. Short-term insurers must extend these time limits to the 90-day period allowed for policyholders to make representations regarding the rejection or dispute of a claim or the quantum of a claim. Time limits in new policies entered into from 1 January 2011 may not include the 90 day period given to policyholders...
The law firm observes: “Every policy from 1 January 2011 must allow a period of not less than six months after that 90 day period for the institution of legal action! Every policy with greater limitations must be amended, by an endorsement as follows:
“Despite anything else in this policy:
1. Any time limitation provision for the institution of legal action provided for in this policy is extended by the period of 90 days allowed for the policyholder to make representations to the insurer in respect of any decision to reject or dispute a claim or the quantum of a claim for a benefit under the policy within a period of 90 days after the date of receipt of the notice of rejection or dispute.
2. The policyholder has 6 months [CHANGE ACCORDING TO POLICY LIMITATION PERIOD] after expiry of that 90 day period for the institution of legal action.”
Rules around claims rejection change too
An insurer will have to make changes to its claim rejection procedures too. The PPR requires all insurers to “make up their minds about a claim within a reasonable time after receipt of the claim.” Although this is a step in the right direction the term “reasonable” remains open to interpretation. Experience across every facet of the financial services industry shows that the clients’ interpretation of “reasonable” varies significantly from the product providers!
The new rules allow insurers to take their time in reaching claim reject / dispute decisions, because they’re not bound to reach such decision until all required documentation has been received and all claims investigation completed. But there are concrete limitations. Once a decision has been taken to reject / dispute a claim it must be communicated to the policyholder within 10 days.
Says Deneys Reitz: “The notice of rejection must give the policyholder not less than 90 days of receipt of the notice to make representations regarding the decision to reject or dispute the claim. Because the period runs after the date of receipt of the notice, the insurer will have to make sure that the notice is received by the policyholder so that they know when the 90 days begins to run.”
Ombudsmen have an important part to play
The insurer must also inform the policyholder of their right to lodge a complaint with an appropriate Ombudsman. Deneys Reitz suggests insurers can use something similar to the “How to Complain” section published on the FAIS Ombud’s website – and include such text with the notice of claim rejection / dispute...
If the complaint is against us as your insurer you must lodge a complaint with the Ombud for Short-Term Insurance. The procedure for lodging a complaint may be found on the website for the Ombud for Short-Term Insurance (www.osti.co.za/logde a complaint) or may be obtained from the Ombud (telephone 011 726 89000; fax 011 726 5501 or email [email protected]; physical address JCC House, 2nd Floor, 27 Owl Street, Johannesburg, 2092. [Long-term insurers should substitute with details of their Ombudsman]
If you have a complaint against the intermediary (e.g. a broker or underwriting manager) you must lodge a complaint with the FAIS Ombud. You must lodge a complaints registration form that may be downloaded from the FAIS Ombud’s website (www.faisombud.co.za/how to complain) or obtained from the FAIS Ombud (telephone 012 4709080; fax 012 3483447 or email [email protected]; physical address Eastwood Office Park, Baobab House, Ground Floor, Corner Lynnwood Road & Jacobson Drive, Lynnwood Ridge, 0081).
Editor’s thoughts: I can’t imagine anything more frustrating than waiting 90-days for a decision in the information age. We have cellular telephones, email and Internet and should really expect an insurer with efficient internal processes to make claims rejection / dispute decisions in days rather than months. Have you ever taken a short-term insurer to court? If you’d like to share your experiences please send your comments to [email protected]
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