Short-term insurance policyholders benefit from new amendments

Short-term insurance policyholders now enjoy extra protection under the law following an amendment to the Policyholder Protection Rules in the Short-term Insurance Act.

The amendments now require insurers to decide about claims within a reasonable time after receipt of a claim, and to communicate to the policyholder within 10 days of making a decision.

The rejection letter must inform a policyholder of his or her right to lodge complaints with either the Short Term Insurance Ombudsman or the FAIS Ombudsman. It must therefore spell out all avenues open to policyholders if they are not satisfied with the manner in which their claims have been handled. The Rules were amended to ensure a balanced and fair approach to decision-making and time limitations relating to claims under policies. The amendments apply only to personal lines policies where policyholders are insuring their personal property.

“A further important change is that policyholders now benefit from extended periods in which to make representations and institute legal action should claims be rejected,” says Sedick Isaacs, executive general manager for Claims at Mutual & Federal, a member of the Old Mutual Group. The time limit stated in these policies for instituting legal action is now extended by a further 90 days.

“In the past, if a policyholder wished to institute legal action in the event of a claim being rejected, he or she had to do so within 180 days of receipt of the rejection letter,” says Isaacs. “Under the new regulations, the policyholder now has 90 days from date of receipt of the rejection letter to make representations to the insurer contesting the rejection and has a further period of six months after expiry of the 90 days to institute legal action. Furthermore provided that well-argued rationale is put forward by the policyholder, a court may even disregard non compliance within the above time limits.”

If a policyholder does make representation contesting a rejection, the insurer must notify him or her of its final decision within 45 days of receiving the representation

“Another important change is that an insurers response’s to representations must contain reasons for the decision and must include appropriate facts” says Isaacs. “A summary of the basis for the continued rejection or dispute must be given as plainly and briefly as possible.”

Isaacs also stresses that all claims submitted are paid according to terms and conditions in place between the policyholder and Mutual & Federal. “We aim to be fair to consumers, and we pay out claims in terms of our contracts with them. Rejection of claims does happen every now and then, but we certainly do not look to reject claims.”

“It is clear that policyholders thus enjoy additional protection under the new amendments, which came into effect on 1 January 2011 and wording on older policies that do not comply with the new regulations will obviously be superseded by these new provisions where applicable.

Mutual & Federal is one of the leading short-term insurers in southern Africa.