The “nasty” terms and conditions
The latest determination from the Deputy Ombud for Financial Services Providers, Noluntu Bam, makes for some interesting reading. There are no surprises in the ruling. A disgruntled insurance policyholder decided to lodge a complaint with the industry Ombudsman after learning that his insurance company had refuted a policy claim for motor vehicle theft. The wording in the insured’s policy required that his vehicle be kept in a locked garage or similar structure for a theft claim to be upheld. And although the insured’s vehicle was kept behind a locked gate, ‘protected’ by a number of dogs and ostriches, and chained to another vehicle this condition was not met.
The usual process for resolving an insurance dispute is to take the complaint to your insurance broker and then the insurance company concerned. Only then can you consider escalating the complaint to the Ombudsman for Short-Term insurance. Let’s examine why this case became a claimant versus broker case handled in terms of the Financial Advisory & Intermediary Services Act (FAIS) by the FAIS Ombud rather than a claimant versus insurer dispute.
As usual the broker carries the can
The answer is simple. It was clear to all concerned that a complaint against the insurer’s decision to refute the claim would be unsuccessful. There was no question that the policy document required the insured’s vehicle to be properly secured. And there was no doubt that the insured had failed to secure the vehicle in the required manner.
Thus the only route open to the insured was to cast aspersions on his broker, claiming that the broker had not informed him of the specific exclusion in the policy. The case put to the FAIS Ombud was not whether the claim rejection was fair or not; but whether Heritage Insurance Brokers (Pty) Limited: “was negligent in not making the complainant aware of the condition of insurance which was breached, thus leading to the insurer rejecting the claim for theft of the vehicle.” In other words – when all else fails – see if you can find a weakness in your brokers’ communication and administration process.
During the investigation it emerged that the claimant, Abrie Burger, had indicated the vehicle would be kept in a locked garage when completing the insurance application. After the cover was put in place Heritage Brokers forwarded a policy letter to the insured, including the advice: “unless otherwise provided for, overnight theft from the permanent place of residence is EXCLUDED unless the ATV/Off road vehicle is kept in a fully enclosed garage or carport and both any door and any gate leading to the garage or carport is kept locked at all times and there is proof of visible, violent or forcible entry/exit.” And this was fortunately enough to convince Bam.
Expect a no compromise stance from short-term insurers
Bam refused the complaint. “There rests a duty on a broker to draw the insured’s attention to material clauses in the insurance contract,” she said. “However, in the matter before me the complainant himself stated the vehicle would be kept in a locked garage at night and then failed to do so when it was stolen. It, therefore, cannot be said that in this case the respondent was negligent in rendering the service to the complainant.”
Times are tough for short-term insurers at the moment particularly with troublesome motor books and decreasing headline earnings. You can expect them to take a rather dim view of claims where policy terms and conditions are not met. Policy terms and conditions will be enforced more stringently and no leniency will be shown by the Insurers.
Editor’s thoughts:
Today’s newsletter highlights a situation which must play out hundreds of times each year. The insured fails to comply with the terms and conditions contained in the insurance policy document. Inevitably, you have had to tell a client that their claim will not be entertained as a result of non compliance of a policy term and condition. Did the client easily accept the fate and/or did they argue that you as the broker did not tell them of the specific exclusion. We’d love to hear your stories on repudiations that have crossed your table. Add your comments below or send them to [email protected]
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