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Short-term ombudsman ‘wins’ R84m for insurance consumers

28 March 2008 Gareth Stokes

The Office of the Ombudsman for Short-Term Insurance (Office) presented its 2007 Annual Report at a function in Johannesburg earlier this week. And the good news for disgruntled short-term insurance consumers is that despite the Office finalising fewer ca

Complaints on the increase

The Office received a total of 12 476 complaints in 2007. This was up 26.3% on the total for the previous year. These complaints comprised formal complaints against insurers and preliminary complaints or enquiries. Martin noted that 9 083 formal complaints were made against insurers due to the rejection of claim or other related issues... The balance of 3 393 complaints included general enquiries, requests for guidance or advice and general complaints regarding poor service from insurers. Many of the complaints in this category are referred to other financial services Ombudsman.

As mentioned previously the turnaround time per case declined to 97 days from an average of 87 days in 2006. Apart from the staff problems these delays can be ascribed to “the thoroughness with which complaints are investigated and adjudicated upon.” Martin believes the Office should focus on quality over quantity; but stressed that the entire staff complement were dedicated to reducing turnaround times in 2008.

Overturn rate remains acceptable

The ‘overturn’ rate refers to the number of insurer decisions that are subsequently reversed by the Ombudsman. Martin notes that although the 2007 rate of 35% was higher than 2006 it remained within expected parameters. It was also similar to the overturn rates achieved in similar offices around the globe. The only way to significantly improve this rate would be for both insurer and insured to change their behaviours.

Martin says one of the great disappointments in his first year as Ombudsman came from the number of insurers who insisted on approaching policy terms and conditions from a “strict legal-technical” viewpoint. These insurers were not prepared to adopt a more flexible approach demanded by the principles fairness and equity which guide the Office.

Consumers also contributed to the heavy case load. “Sadly, a large number of complaints arise from a lack of understanding insurance, or a failure to understand the significance and importance of information communicated to an insurer when proposing for insurance products,” says Martin. This emphasises the importance of ongoing consumer education and the necessity for complete and effective communication between insurance broker and end consumer.

Motor insurance accounts for 67% of cases

A pie chart of the categories of insurance and the complaints generated in each category largely echoes the market for such products. Thus motor claims accounted for 67% of all complaints with home-owners policies accounting for 12%. Complaints arising from miscellaneous categories (including cell phone, travel and disability insurance) accounted for 11% of total claims with householders (6%) and commercial (4%) making up the balance. An alarming number of cases in the motor category related to motor warranty policies. Policy wordings are so ambiguous that even experts disagree on the correct interpretation of some terms. The Office presented to the Life Offices’ Association enquiry panel on Consumer Credit Insurance in this regard.

The Ombudsman made seven formal rulings in the year, which revealed two major areas of concern. The first is the refusal of claims due to Alarm Warranties; and the second the refusal of claims due to Professional Driving Permit contraventions. Martin observers: “The Professional Driving Permit continues to be a bone of contention, notwithstanding that in previous years insurers had accepted the view of this Office that a claim should be accepted where the absence of a Professional Driving Permit was not material to the loss.” The intention of this ‘soft’ stance was to prevent the insured from becoming a victim of bureaucratic ineptitude... On the Alarm Warranties issue, Martin said: “The number of consumers that find themselves victims of the unacceptably high crime rate prevailing in the country and the efforts on the part of the industry to curtail payments of claims resulting from burglaries is expected to continue.”

Editors’ thoughts:
Despite the focus on consumer education and stringent ‘advice’ requirements introduced through the FAIS Act the number of short-term insurance complaints is on the rise. It is time for the Ombudsman for Short-Term Insurance to compile a dossier of ‘problems’ that could assist in a ‘prevention rather than cure’ approach for the industry. Do you think the industry is doing enough to prevent the escalation of short-term insurance complaints? Add your comments below, or send them to gareth@fanews.co.za

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