The importance of understandable policy wordings

As part of its 'risk management' platform, Santam, the country's largest short-term insurer, has committed itself to making insurance policies simpler to read and understand. The objective is to enable policyholders to be able to extract important information with ease and therefore to exercise more control over rising premiums.

Caroline da Silva, Head of Portfolio Management at Santam says, "Simpler policies, accompanied by easily accessible broker and call centre advice means that policyholders will be less likely to have a claim rejected as a result of 'not knowing' the terms of their contract.

"By providing need-to-know information in a clear and accessible way, policyholders are less likely to miss out on important details that may have been lost in the fine print before.

"The industry sometimes has a very negative image amongst the general public. At Santam, we are determined to play our part in ensuring improved relationships with all our policyholders and brokers, and for this reason we will do our best to provide clients with simple and clear documentation, along with appropriate education and support."

"But," Da Silva warns, "An insurance policy is a two-way street and will be based n the information given by the customer. It is thus very important that the customer makes a full disclosure to the insurer or his broker. Since this will determine the appropriate terms and condition of the policy. Once the client receives the policy he or she needs to ensure they read it carefully.  Ultimately it's all about communication and we really encourage policyholders to ask questions if they are unsure about any element of their policy at any time.
 
Da Silva cites several industry examples where policyholders have been left out of pocket as a result of having omitted important information up-front, or where they have failed to study their policy documents adequately.

In general Da Silva notes that a policy becomes immediately voidable if an incorrect claims' history is submitted or where any details that could affect the risk are not disclosed.

"Often, policyholders do not fully disclose claims history, which provides the insurer with a good indication of individual risk from which individual premiums are determined.

"Policyholders also often forget to upgrade policies when an insured item is upgraded, or they neglect to inform the insurer when new risk appears. For example an insurer would need to know about the presence of builders at a policyholders premises.

Da Silva says that by not implementing the security measures required in terms of ones policy - for example by not fitting burglar bars at home or gear locks in cars, where specified and required in terms of ones policy - an insurer would be entitled not to pay out should a theft occur. 

"And, once the security is in place, it needs to be used properly. It's no good installing an alarm system but not activating it," she says.