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Insurers cough up R118m as Short-term Ombudsman cracks the whip!

27 March 2009 Gareth Stokes

South African short-term insurance consumers would have been R118m out of pocket if it hadn’t been for the Ombudsman for Short-term Insurance (OSTI). This significant recovery was undoubtedly the highlight in the OSTI 2008 Annual Report. Ombudsman Brian M

Good recoveries; but people are growing old in the waiting room!

The bad news for the policyholder who feels ‘cheated’ by his insurer is that the average days taken to resolve a complaint brought to the Ombudsman has gone through the roof. If you thought the 97 days ‘wait’ announced in 2007 was bad, spare a thought for Joe Average who was stranded in insurance claim limbo for 178 days in the latest period. Moses Moeletsi, Chairman of the OSTI Board said this deterioration was due to ongoing staffing issues. “Last year I reported on the major upheavals that the Office experienced due to the loss of skills as a result of retirement and resignations,” said Moeletsi. He says the 2008 slowdown was inevitable as “new staff need time to become fully effective from an operational perspective.”

Martin expanded on the problem during his presentation of the annual results in Johannesburg on 25 March 2009. He noted that of the 28 OSTI staff when he took the reins, only deputy ombudsman Hendrik Viljoen was still with the Office today. That means there are 31 staff members with less than two years service at OSTI! Both Martin and Moeletsi expect the turnaround time to improve over the next 12 months. But they’re going to need help from insurers who can speed up the process by providing quicker responses through the complaint resolution process.

Is a 37% overturn rate really acceptable?

OSTI has engaged members in the short-term insurance industry in an open and transparent manner. In January 2008 a workshop was held to explain the structure, workings and approach of the Office in dealing with frequently encountered issues. The programme was a success and will be repeated in 2010. As a result of this communication, insurers have a better “understanding of the application of equity by the Office, particularly the yardsticks of materiality and prejudice” when determining whether a claim should be paid or not.

FAnews Online wonders if this ‘better understanding’ among short-term insurers of OSTI processes is in the consumers’ best interest. Martin reveals that the overturn rate (the number of claims initially rejected by an insurer and subsequently overturned by the Ombudsman) climbed to 37% in 2008 (up from 35% in 2007). “This increase is largely attributable to the introduction, on a formal basis, by the Office of the principle of proportionality and the intention on the part of the insured in cases of incomplete or inaccurate disclosure,” says Martin. Where cases involve incomplete or incorrect disclosures that affect premium assessments, the Ombudsman encourages insurers to settle claims on a proportional basis rather than taking an ‘all-or-nothing’ stance.

The Ombudsman bemoans the fact that “a large number of complaints which ultimately have their origin in a lack of understanding of the basic principles of insurance or the significance and importance of information which is communicated to an insurer at the time of inception.” But whatever the reason for the increase, it still means short-term insurance policyholders have to stick to their guns to get insurers to pay legal claims. It might be time for the Ombudsman to publish statistics to include details of the short-term insurers that regularly beat a path to its door!

A lean year for Ombudsman rulings

Martin welcomed the turnaround in the number of formal rulings the Office had to make in 2008. He only made one ruling in the latest period, compared to seven in 2007. “This is most pleasing indeed and reflects, to a large extent, the better understanding which exists as to the approach adopted by the Office to many common problems,” said Martin.

But numerous challenges remain. Martin said their were fundamental differences of opinion between OSTI and certain insurers “concerning such issues as professional driving permits and the compliance with statutory obligations for cover to exist in terms of insurance policies.” There was an alarming increase in the number of complaints due to rejections of theft and burglary claims throughout the year too. Martin says consumers were battling to comply with “increasingly onerous obligations in terms of policy contracts.” And it was unacceptable that so many consumers were unaware of their obligations in terms of the contract, and the consequences of non-compliance.

Intermediaries in the short-term insurance space should pay close attention to these comments. We don’t have to remind them where disgruntled clients turn when every other avenue is exhausted. If their complaint is rejected by the insurance ombudsman they could be knocking on the Ombudsman for Financial Services Providers’ door next! Like it or not, it’s your job to inform your client of the terms and conditions in their short-term insurance contract.

Editor’s thoughts: Transparency is the buzzword for financial services in the 21st Century. Consumers want providers to come clean on fees – they want intermediaries to come clean on commissions – and they want the Ombudsman to come clean on which insurers frequently push the boundaries. Would you like the Ombudsman for Short-term insurance to publish statistics detailing overturned and upheld complaints by insurer? Add your comments below, or send them to gareth@fanews.co.za

Comments

Added by Mariana, 15 Sep 2009
I would like more transparency from the Ombudsman in terms of their processes and turnaround times especially when it comes to insurers taking forever to provide responses to the Ombud. It would also be helpful to know the statistics about the various insurers frequently ending up at the Ombudsman. Turnaround times is a huge concern, in my case my husband lodged a complaint with the Ombud in September 2008 and is still waiting on an answer. I have no doubt that the Ombud is doing there best to assist us, but they should be more harsh when it comes to getting responses from the insurers involved, because everytime we call we are told that they are awaiting insurer responses.
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