Nicolette Dirk, finance writer, Justmoney.co.za
The Ombudsman for Short-Term Insurance (OSTI) resolved claims worth R119 million, in favour of consumers, during 2013.
OSTI’s latest annual report showed that 9 368 complaints were received last year. This was an increase of 245 or 2.7% from 2012.
OSTI offers a free service to consumers who have disputes with insurers. It covers both personal and commercial short-term insurance products, such as motor and household insurance.
Of the total complaints, 4 542 (48, 5%) were as a result of rejected motor insurance claims, while (1 934) 20, 6% related to house owners’ insurance. Only 5% (468) were commercial.
Why are there more rejected motor insurance claims?
Santie Stevens, short term insurance manager at InsuranceBusters, said that motor insurance claims get rejected when policyholders drive under the influence of alcohol, drive cars that are not roadworthy and give incorrect information when they sign up for their policies. In most terms and conditions, a claim will be repudiated if the policyholder is found to have broken the South African road rules.
“You will, for example, get a policyholder who claims they are the main driver when in actual fact someone else drives their vehicle the majority of the time. The terms and conditions of an insurance policy is there to protect all the members who contribute to the pool,” said Stevens.
Jooste said the rise in the number of complaints may be because there was an increase in claims registered due to bad weather conditions over the past year and the growing awareness of consumers of their contractual rights.
“The effect of the Financial Services Board’s Treating Customers Fairly campaign may also have started to have an effect, with consumers becoming more educated about customer service issues,” said Jooste.
Insurers versus the Ombudsman
Dennis Jooste, the Ombudsman said thanks to the high level of co-operation from insurers, 87% of cases were resolved within six months in 2013, up from 63% in 2012.
He added that since OSTI was established 25 years ago the industry had matured, with enhanced powers being vested in the Ombudsman to make rulings.
“Initially insurers were hesitant and undertook only to give ‘serious consideration’ to a recommendation by the Ombudsman. Now insurers are contractually bound to honour any rulings made by the Ombudsman.
These additional powers have been used responsibly, which shows in the fact that a final ruling has never been ignored by an insurer,” said Jooste.
Stevens said the short-term insurance industry welcomed the impartial way the Ombudsman deals with disputes.
“The Ombudsman is there to protect the client as well as the insurer. Fraud has become a huge problem where people make dishonest claims to enrich themselves. When such people go to the Ombudsman he will look at both sides of the story to make a fair ruling,” said Stevens.
The average turnover rate for the year was 33%, which means only one out of three decisions made by an insurer was overturned.
Opportunity to appeal
Another major development was the introduction of an appeal mechanism. Three eminent retired judges will serve on the appeal tribunal, chaired by former Chief Justice, the Honourable Mr Justice Sandile Ngcobo.
Two former judges of the Supreme Court of Appeal, namely Judge P.M. Nienaber and Judge T.D. Cloete will also serve on the panel.
Jooste said discussions with regulators continued around the model of oversight envisaged in the new Financial Sector Regulation Bill which would see the Financial Services Ombud Schemes Council oversee all voluntary Ombud schemes.
“There are, however, certain aspects of the bill which remain of concern and these are still being addressed by the Ombudsman in consultation with the National Treasury,” he said.
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