An insurance company cannot arbitrarily amend the terms and conditions of a policy without bringing the changes to your attention and asking you whether you want to continue with the policy. The financial services ombud, Noluntu Bam, recently ordered an insurer to pay out a claim it rejected, because amendments to the policy, which formed the basis for the repudiation, were not properly communicated to the policyholder.
According to Bam’s determination, in March 2009, Ms AK took out a Journey Traveller ER policy with Bensure Insurance Underwriters of Randburg, Gauteng. The policy covered emergency hospital costs in the event of a motor vehicle accident, providing a lump sum of R30 000.
In May 2009, Bensure was acquired by Workers Life Insurance, which became responsible for Bensure’s obligations towards its policyholders.
In January 2010, the taxi in which Ms AK was travelling was involved in a serious accident. Two passengers died on the scene, and Ms AK was trapped in the mangled vehicle for almost an hour. Firefighters had to use specialised equipment to cut her out of the wreck.
Ms AK was rushed to Kingsway Hospital in Amanzimtoti. She was admitted via the emergency unit and spent four days there.
Workers Life rejected her claim, because, “according to hospital reports, [Ms AK was] admitted for observation and [her condition] cannot be deemed as [having been] life-threatening”.
Ms AK first complained to the Ombudsman for Short-term Insurance, which forwarded the complaint to Bam’s office after failing to obtain a response from Workers Life.
According to the determination, Ms AK’s policy document was originally worded as follows: “An insured event is an unexpected illness, disease or accident suffered by the insured, which results in the insured being admitted to a hospital via an emergency unit and having to spend a minimum of 24 consecutive hours in hospital as a result of that emergency event.”
It also stated that the insurer “reserves the right, by giving the insured at least four months’ written notice, to amend this policy at any time in whole or in part”.
In response to the complaint, Workers Life told the ombud’s office it had repudiated the claim because the policy had been amended. The amended policy stated: “Accident means an unexpected, acute, life-threatening event, which leads to the insured requiring an emergency admission into a hospital for the purpose of a medical or surgical procedure (this does not include observation/s).”
Bam’s office asked the insurer when and how notice of the amendment and the amendment itself were communicated to Ms AK. To this request, the determination says, “the respondent provided an extremely vague and unhelpful response”. Workers Life said it communicated the updated terms and conditions to Ms AK “prior to 2010”, but it could not provide any proof that the communication had been sent or that Ms AK had accepted the changes to her policy.
Bam found that, on the balance of probabilities, the insurer failed to prove that it had complied with its own policy rules, and that its reliance on an amended policy was “bad in law”.
The ombud ordered Workers Life to pay Ms AK R30 000, plus interest on this amount at 10.25 percent a year from February 9, 2010 (one month after the insured event) to the date of payment.