Lies, fibs or alternative facts, it doesn’t matter what you call it or what shade of white it takes on, lying to your short-term insurer is never a good idea.
When it comes to insurance, some customers have been known to bend the truth to reduce their perceived risk.
While keeping quiet in your personal life could save you face, failing to inform your financial services provider of key facts regarding your assets or risk profile is never advisable, according to Soul Abraham, Head of Commercial Lines at Mutual & Federal.
“Yes, you may save money at the onset but somewhere down the line your non-disclosure will come back to bite you," Abraham says.
“Often, insurers root out mistakes early on. In the course of processing applications, details are checked by referencing various and extensive databases, and at a minimum, that would mean more expensive premiums or even any cover being denied by service providers,” he says.
Furthermore, if initial misrepresentations are revealed further down the line or when claims are submitted, your cover will be void. It is essentially fraud. Apart from not being insured, potential legal consequences also exist.
Abraham says that inflating or overstating claims makes up some of the largest cases of fraud in the local industry. The Association for Savings and Investments South Africa (ASISA) recently released claims fraud statistics for 2015, which revealed that while the number of cases of fraud and dishonesty uncovered almost halved from 8 306 cases in 2014 to 4 381 in 2015, the average value of these claims has risen substantially.
“The bottom line however not revealing the true value or state of your affairs, whether in oversight or by intent, like underestimating your valuables or not revealing your alarm system is broken, there is no doubt that your policy will not pay out what you expected and not sufficiently cover your losses.”
Abraham says as a policyholder, you need to not only be truthful with your insurer but also re-evaluate your circumstances and cover constantly. It is also important to understand the general principles of short-term insurance, he says.
Mutual & Federal provides the following advice to potential and standing policyholders to ensure they always have all their bases covered:
• The assessment of your risk profile and subsequent premium and insurance cover is based on the full disclosure of all material information. Be honest with the facts when you take out insurance, and maintain this honesty throughout your relationship. You don’t want your cover to become voidable when the non-disclosure becomes known.
• You can’t insure something in which you don’t have an interest. For example, when adult children move back home and bring with them their own assets, which they don’t bother to insure. Unfortunately, parents cannot cover the risks on their behalf but can include their name on the policy so that these assets are included.
• Most people don’t have adequate cover for their household contents and the insurer can penalise you for being under-insured and can pay you out in terms of the average value of assets as stipulated on the policy. It is important to revalue your assets annually to ensure you have sufficient cover. You don’t want to fall short when assets need to be replaced.
• Be aware that the onus is on you to prove your losses. Keep proof of purchases of valuable items, take photographs of each item in your home and keep a record of it.
• Take note of exclusions like “no water damage”. Some insurance companies exclude water damage to an engine.
• Be aware of multiple excesses. Some policies apply multiple excesses, meaning that in addition to your standard excess others may apply. For example, young or new drivers who haven’t had a license for a certain number of years, can be liable for an additional excess. Another example would be if you have an accident within six months of obtaining cover.
“Most importantly, read your policy carefully. If there is anything that you don’t understand, ask your broker or insurer to explain it to you. Furthermore, if you have a complaint against your insurer, you can contact the Ombudsman directly. The role of the office of the Ombudsman for Short-term Insurance is to provide an independent, fair and cheap dispute-resolution service to the public. You can contact the ombudsman on telephone 011 726 8900 or sharecall 0860 726 5501 or email info@osti.co.za. Or go to their www.osti.co.za,” concludes Abraham.