SOUTH AFRICA (businesstech.co.za) – The Ombudsman for Short-Term Insurance (OSTI) recently published its annual report for 2017, revealing the most complained about short-term insurers, and the types of insurance vehicles in South Africa that receive the most complaints.
During 2017, the ombud said it finalised a total of 9,962 formal complaints, with an average turn-around time of 131 days.
It said that it fielded nearly 80,000 calls and recovered a total of R87.1 million for consumers, down from R99 million recovered in the prior year from 8,631 cases closed.
The OSTI noted that the bulk of complaints were received in the motor insurance sector, making up nearly half (49.3%) of all complaints, up marginally from previous years.
The insurance body said that 74% of complaints in the motoring sector were for ‘accidental damage’.
Worryingly, this figure mainly comprised claims rejected on the grounds that the insured was driving under the influence of alcohol. The ombud noted that some insurance companies have introduced measures such as the ‘take me home’ service to manage the risk associated with drunken driving.
“However, it is clear from this year’s statistics, that DUI remains a very real problem for the South African insurance industry,” it said.
The second highest cause for complaints was rejections based on a policyholder’s alleged misrepresentation of underwriting details at sales stage.
Examples include misrepresentations about regular driver details, previous insurance and claims history, credit history, security devices and whether the vehicle would be used for personal or business use, the ombud said.
A significant number of complaints related to rejections based on the policyholder’s obligation to excersise due care and to prevent loss, it said. When the ombudsman assesses disputes of this nature it requires that there be a causal connection between the insured’s conduct and the accident.
Complaints relating to quantum (value) disputes were also high, it said. “These disputes frequently relate to the settlement calculation in respect of a total loss claim, that is, when the vehicle has been stolen or written off. The settlement calculation may result in a shortfall where the vehicle is financed.”
Warranty and mechanical breakdown claims comprised 9% of complaints considered by OSTI in 2017. “We have noticed that the cause of these disputes often arose from the insurer’s advice provided as sales stage,” the OSTI said.
For homeowners claims, the OSTI said that given the extreme weather conditions experienced in 2017, complaints largely related to acts of nature.
“The primary cause for complaint was the dissatisfaction with the rejection of claims on the grounds of damage arising from gradual deterioration, maintenance, wear and tear, which is not the responsibility of the insurer to remedy, it said.
“In general, the Ombudsman will assess these matters by asking whether the loss or damage would have occurred if the property had been properly maintained. If it clearly would have occurred even if the property had been adequately maintained the Ombudsman will usually uphold the claim.”
The secondary cause for a complaint under homeowner’s claims related to quantum disputes – the most prevalent being the settlement calculation in circumstances where the policyholder was underinsured.
There were also a significant number of complaints relating to rejections on the basis that no insured event occurred, the watchdog said.
Under household content claims, theft and burglary claims comprised 73% of formal complaints considered by the OSTI in 2017.
73% – theft and burglary claims
7% – acts of nature
6% – accidental damage
5% – power surges
It said it also considered non-claim related policy complaints such as policy cancellations, premium refunds and instances where the insurer has not complied with its obligations.
“Our statistics reflect an increasing number of complaints relating to mobile device insurance claims at 29%, legal expenses cover at 4.3% and hospital plans at 5%. Again, we often find that these disputes stem from the quality of the communication that takes place at sales stage.”