Why a claim may be delayed and the role of an Internal Arbitrator

Delays in insurance claims remain one of the most common sources of policyholder dissatisfaction, often placing financial advisers at the centre of difficult conversations.

While policyholders may expect rapid settlement, the reality is that claim validation requires time, investigation and evidence.

The reason for this is that insurers must first determine whether a claim is valid before it can be settled. This process, known as claims validation, requires insurers to investigate the circumstances surrounding the loss or damage and gather the necessary evidence before a decision can be made.

Some claims are resolved relatively quickly, while others are more complex and require extensive investigation. The time it takes to validate a claim often depends on factors such as the nature of the loss, the availability of evidence, and the level of cooperation between the policyholder and the insurer.

It is important to distinguish between a delay and the time required for proper claims validation. Many claims may take longer not due to inefficiency, but because of the need for thorough investigation to ensure fair and accurate outcomes.

Personal insurance claims are generally more straightforward than commercial insurance claims. Certain types of cover are highly specialised and require expert assessment before a claim can be finalised.

For example, a claim involving the loss or damage of specialised machinery in a warehouse may require a qualified expert to inspect the machinery, assess the circumstances and determine the cause of the damage.

Similarly, claims involving damage to warehouse property or agricultural crops may require technical investigations by specialists to establish the cause of the loss. Naturally, these types of investigations can take longer to complete.

For financial advisers, understanding these dynamics is critical, as they play a key role in managing policyholder expectations and helping them understand why certain claims require more extensive investigation.

In some cases, insurers may require additional evidence before deciding whether to settle or reject a claim. A motor vehicle accident claim, for instance, may not always be straightforward, particularly when questions arise around the location, timing or circumstances of the incident.

Evidence may need to be obtained from independent witnesses, police reports, hospitals, doctors or surveillance footage from nearby homes or businesses. In commercial insurance, business interruption claims often require extensive financial and operational information before they can be properly assessed. Gathering and reviewing this information can add to the time needed to finalise a claim.

The cooperation of the policyholder also plays an important role in the process. Delays can occur when requested documents, information or evidence are not provided promptly, making it more difficult for the insurer to complete its assessment.

What advisers can do to minimise delays:

• Set clear expectations with policyholders at policy inception
• Encourage prompt reporting of claims
• Ensure policyholders submit complete and accurate documentation
• Guide policyholders through insurer requirements and timelines
• Proactively engage during complex claims to avoid escalation

There are also instances where an insurer may reject a claim based on exclusions contained in the insurance policy. It is important to remember that an insurance policy is a contractual agreement between the insurer and the policyholder, and the terms of that agreement guide decisions on whether a claim is accepted or declined. However, policyholders who disagree with the outcome of a claim have the right to challenge the decision.

Most insurers have internal dispute resolution processes that allow policyholders to raise concerns about the outcome of a claim. At Old Mutual Insure, for example, policyholders can refer disputes to the Office of the Internal Arbitrator. While internal to the insurer, this process is designed to operate independently, applying principles of fairness, law and evidence comparable to those used by external adjudicators. The Internal Arbitrator is an experienced insurance professional with a legal background who assesses disputes by applying principles of fairness, law and evidence.

While insurers aim to resolve claims as efficiently as possible, dispute resolution processes such as internal arbitration can add additional steps and time to the process. These mechanisms are nevertheless important in ensuring that claims are assessed fairly and thoroughly.

For this reason, although it is not a requirement to first do so, policyholders are generally encouraged by insurers to first make use of internal dispute resolution mechanisms, as it can be faster and efficient while still applying standards similar to those used by external adjudication bodies such as the National Financial Ombud Scheme, the FAIS Ombud or the courts. Internal dispute resolution is often quicker and allows for early resolution, while external adjudication bodies provide fully independent review, although typically with longer timelines.

For advisers, the key lies in bridging the gap between insurer processes and policyholder expectations. By setting realistic timelines, supporting clients through the claims process, and using dispute resolution mechanisms effectively, advisers can play a critical role in maintaining trust and achieving fair outcomes.