There are conditions that are common to all insurance policies of a certain type, no matter which insurer you choose, and it pays to be aware of them.
A recent case before the Ombud for Financial Services Providers, Noluntu Bam, went the way of an insurance company when it was found that, although a policyholder had not been informed of a change of underwriter, the insurer’s reasons for rejecting a claim were valid, and the policyholder could not show that another insurer would have dealt with the claim any differently.
Mr P bought a car in October 2012, and he immediately insured it. His broker was KPC Brokers, the underwriting manager was MUA Insurance Acceptances and the insurer was Compass Insurance. Before taking out the policy, Mr P had done some research and satisfied himself that MUA and Compass were reputable companies.
Nearly two years later, in August 2014, Mr P was involved in an accident, and his car was declared a write-off.
In September 2014, he received a letter from MUA informing him that his insurance claim had been rejected. The reason was that the vehicle was not in a roadworthy condition: the tyres were badly worn, and this was “material to the cause of the loss”.
The letter also mentioned that the insurer was Auto & General Insurance Company, not Compass.
Mr P complained to the ombud, saying MUA had changed insurers, from Compass to Auto & General, without his knowledge or consent. He said that, if had he known of the change, he would not have agreed to a contract with Auto & General and would have found another insurer. He submitted that another insurer, in the circumstances, would not have rejected his claim.
On investigating, the ombud’s office found Mr P had, indeed, not been informed of the change of insurers. MUA had forwarded notification of the change to Mr P’s broker, KPC, but KPC had not passed the information on to its client.
The ombud’s office then looked at the nature of the claim itself. Although the insurer had changed, the terms and conditions of the policy, which MUA administered, had not. In its defence, MUA said that any other insurer would have similarly rejected the claim.
Bam says in her determination, the key question is: would Compass have rejected the claim if it had still been the insurer? She says Mr P failed to show that Compass would have paid the claim, and was unable to show “any causal connection between his loss and the failure [of KPC] to give notice of the change of insurer”. For these reasons, she dismissed Mr P’s complaint.
In the determination, though, Bam says the communication from MUA of the change of insurers, which Mr P did not receive, was inadequate. It read: “We are delighted to inform you that MUA Insurance Acceptances will underwrite on behalf of Auto & General Insurance from April 1, 2014.”
Bam says: “This is not notice as contemplated in the Short Term Insurance Act … It is as if the insured is being faced with a fait accompli.”
What is required of insurers, she says, is to give notice of 60 days, which should state the following:
• That there is an intention to change to a different insurer; and
• That the policyholder has the choice to accept the change or to find another insurer of his or her choice.