A destroyed house after the raging bush fire that swept through Knysna last year. The devastating fires along the Garden Route cost insurers R4 billion. Picture: EPA
In a year characterised by data breaches, legislative changes and severe acts of nature, including the devastating Garden Route fires, flash floods in Gauteng and KwaZulu-Natal, tornadoes and severe drought across many parts of the country, insurers came under immense pressure in 2017.

The Garden Route catastrophe that stretched from Great Brak to Plettenberg Bay, hit Knysna the worst: 846 houses were gutted (including 150 informal structures) and another 307 were damaged, according to a GroundUp report. About 50% of those properties were uninsured. The fires cost insurers R4 billion, with some homeowners so enraged about their compensation that they’re taking legal action.

Last week, the Ombudsman for Short Term Insurance (Osti) released its annual report, in which acts of nature featured prominently: 13% of all complaints submitted to the office concerned such claims.

The office, which finalised 9 962 formal complaints last year and recovered more than R87 billion for consumers, said complaints about motor vehicle claims comprised 49,3%, homeowners’ claims 20,4%, commercial claims 7,9% and household contents, 6,2%.

The majority of the complaints, 49,3% or 4483 complaints were about motor vehicles and most of those were for accidental damage.

Vehicle claims

The office says the figure mainly comprised claims rejected on the grounds that the insured was driving under the influence of alcohol.

Ayanda Mazwi, senior assistant ombudsman, noted: “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.”

The second highest cause for complaints about vehicle insurance was rejection based on a policyholder’s alleged misrepresentation of underwriting details at the 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,” Mazwi said.

A significant number of complaints related to rejections based on policyholders’ obligations to exercise due care and to prevent loss.

The report said complaints relating to quantum disputes, regarding the settlement calculations for total loss claims, were also high.

Homeowners’ claims

Themed on the extreme weather experienced in 2017, the ombud said most of its complaints from homeowners related to acts of nature - and the highest percentage to storm damage. Most of these reflected dissatisfaction with claims rejection due to maintenance issues, and wear and tear, which are not the insurer’s responsibility. Quantum disputes also ranked highly and most of these were caused by the policyholder being under-insured.

Household content claims

Theft and burglary claims comprised 73%, seven percent related to acts of nature, six to accidental damage and five to power surges.

Commercial

The ombudsman has limited jurisdiction on commercial policies, but most of the complaints related to building claims, at 28%, and motor vehicle claims (especially roadworthiness of heavy vehicles) at 25%.

The recovery of more than R87 billion for consumers is not insignificant, but it’s down from the previous year's figure of more than R99 billion, and well below the heights of 2014, when R116 249 665 was recovered.

Osti ombudsman Deanne Wood noted that the low overturn rate (the percentage of matters where a portion of the insurer’s decision was overturned) has decreased substantially, but it was not because insurers were more accurate in their claims assessments or that Osti was less willing to challenge insurers’ decisions.

She said the reduction was due to a shift in approach by some insurers and an awareness of what this represented for their organisations.

Wood also warned that a low overturn rate did not always indicate an insurer’s service excellence. “This is in fact not the case ... it can have a number of meanings. It can indeed indicate service excellence and a general trend towards making the correct decision at the outset. But, importantly, it can also be indicative of inflexibility, dogged decision-making and an unwillingness to be tractable and to treat each complainant as an individual when considering the merits of a complaint that has been submitted to Osti.

“Whatever the reason, it is my hope that the overturn figures published by Osti will be viewed in the proper context and will be read in conjunction with the other reported insurer statistics.”

This aspect of reporting is under review.

The report notes that ombud schemes allow cool heads to prevail, rather than rushing off to court, and for relationships to be maintained.

Osti chairman Haroon Laher noted the best outcome is a resolution that suits both parties. “If Osti is able to assist consumers and insurers in identifying and focusing on the real underlying issues, and it can get these issues resolved quickly and informally, and without recourse to the application of stringent legal principles, everyone wins.”

OSTI contact details:

Telephone: 011 726 8900; share call: 0860 726 890; e-mail: [email protected] or visit www.osti.co.za

* Georgina Crouth is a consumer watchdog with serious bite. Write to her at [email protected]