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Unclear facts keeps insurer in check

05 February 2018Jonathan Faurie

One of the biggest changes that is about to take over the financial services industry is the relationship between insurers, brokers and policyholders. Treating customers Fairly (TCF) promises to create an environment where fruitful engagements can occur. The broker has always played an important role in the industry. From providing their clients with valuable advice to selling them products which best suits their need, the value of exceptional advice can never be understated

Issues of reflection

While every broker in the industry strives to give their clients the best advice, there are some who can do a little bit more. We see this in the cases brought before the Office of the Short Term Ombudsman where miscommunication can, at times, have dire consequences. 

Over the years, we have seen some interesting interpretations of policy schedules as clients and insurers face the outcome of cases that are brought to the Office of the Short Term Ombudsman (OSTI). Brokers do their best when explaining the product to a client, but do they highlight the instances where insurers may be reluctant to honour a claim? 

Often, the interpretation of a product is a cut and dry case. Other times, there is a bit more to a complaint than meets the eye. This was recently the case at the OSTI. 

Sticky fingers

After a burglary at her house, Mrs A submitted a claim to her insurer. Among the items that were stolen were items that belonged to her brother and sister who were living with her at the time. 

The insurer paid the claim but excluded certain items from the settlement figure as it felt that certain items belonged to family members who they felt were not financially dependent on Mrs A. 

Delving deeper

Mrs A took the issue further and stated during a previous claims conversation with her insurer that her brother was partially dependant on her. According to Mrs A, although her brother received some funds from their father, she provided financial support to him by paying his living expenses. These included rent as well as his contribution towards water and electricity. 

The OSTI found that Mrs A’s brother was financially dependent on her and that the policy did not exclude partial financial dependency. The policy clause relied on by the insurer is thus not applicable in the circumstances. 

The claim in respect of the laptop which belonged to Mrs A’s sister was rejected because, according to the insurer, the sister was not financially dependent on Mrs A and she did not live permanently with her. 

The laptop was bought by Mrs A for her sister, who was the owner of the laptop at the time of the burglary. 

Home and away

Mrs A’s sister was in a learnership programme at the time of the burglary and received a monthly allowance of R5 000. The insurer felt that Mrs A’s sister was not financially dependent on her as she received financial assistance. The insurer was also of the view that she was a guest and not living with Mrs A as required in terms of the policy for there to be cover. 

Mrs A contested that her sister was not a guest and that she lived with her as the learnership venue was closer to Mrs A’s home. She also advised that as part of the learnership programme, her sister was required to travel where she would stay with Mrs A for a period of three months and would then resume her travel schedule. 

Setting the record straight

The OSTI found that the policy clause relied on by the insurer did not require Mrs A’s sister to live permanently with her and that at the time of loss Mrs A’s sister was living with her. 

According to the OSTI, the insurer did not provide any evidence to prove that Mrs A’s sister was a guest. Further, the fact that Mrs A’s sister received an allowance did not prove that she was not financially dependent on Mrs A. Mrs A provided financial support to her sister monthly by paying for her living expenses such as rent, water and electricity. 

The result

Based on the evidence, the OSTI recommended that the insurer settle the excluded items of the claim, which it agreed to do. 

The broker has a critical role to play in this. They are on the frontline of gathering formation and are perfectly placed to give this information to the insurer. This is the advantage that intermediated insurers have over direct insurers. 

Editors Thoughts:
The case should never have made it to the Ombud and one feels that if the insurer applied its mind knowing all the facts, it would have handled the matter differently. With every action that insurers, brokers and clients take from now on, they need to bear in mind that they are either adding to this trust deficit or subtracting from it. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Peter, 05 Feb 2018
Ben, there is no confusion in this article. It clearly refers to Short Term Insurance and the Office of The Short Term Ombudsman (OSTI) Anyone who perceives that this refers to life assurance has very poor comprehension skills.
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Added by Cynical Simon, 05 Feb 2018
Unfortunately the way insurers "apply their minds" of late leaves the ombud as the last and only resort and since the outcome was in favour of insured it proves that referring matters to the ombud has in many cases become the only way to bring sanity into the equation. Brokers such as myself to an increasing extend will themselves refer claims to the ombud since there is strong suspicion that insurers repudiate any unusual claim only to pay same as soon as the ombud gets involved. .
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Added by Ben Opperman, 05 Feb 2018
No problem with the article.
It is my observation that the reaction/interpretation, of the word "insurance", whether it be "short term" or "life assurance", is generally assigned to "life assurance" by the readers. Therefore, the brokers on the "life" side is perceived as the culprits. My view/recommendation - clear distinction be made in articles - which will assist readers to interpret articles correctly as intended.
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