The short-term insurance market is highly competitive, and it is worth your while to review your household and vehicle policies occasionally and compare them with other products on the market. However, you need to be very careful when replacing one policy with another, making sure there are no terms and conditions in the new policy that may be disadvantageous to you and that you are aware of any differences in the excesses (the “first amount” of a claim that you must pay) levied in the event of a claim.
Your insurance broker or adviser, if you are using one, is obliged to inform you of any differences in the policies and ensure you understand the implications.
The first-quarter 2019 newsletter of the Financial Advisory and Intermediary Services (FAIS) Ombud outlines the case of Mrs M, who bought a new car in 2014. She had an insurance policy, and her new vehicle was supposed to have replaced the existing one on that policy. However, Mrs M’s insurance broker recommended that she take out a new policy with another insurer.
Mrs M was under the impression that this was a simple case of replacing one policy with another.
However, when she submitted a claim for damage to the vehicle, on which her 25-year-old son was the nominated driver, she found out she had to pay excesses she was not aware of. These were for the driver of the vehicle being under the age of 30, and the fact that the claim had been submitted within six months of the policy having incepted.
Mrs M’s original policy provided for an excess in the case of the driver being under 25.
She was therefore of the view that she would not have been liable for either of the additional excess charges had it not been for the actions of her broker, so she complained to the ombud.
The ombud directed the complaint to the broker. The broker was asked to show that he had complied with the FAIS code of conduct by clearly disclosing to Mrs M the implications and consequences of switching policies.
The broker was also asked to provide documentation in support of why the replacement policy was deemed to have been appropriate to Mrs M’s needs, particularly when the nominated driver was clearly noted as her 25-year-old son.
The respondent was also asked about the rationale behind Mrs M acquiring the new policy, which would see an additional excess applied for any claim within the first six months, and whether Mrs M had been informed of this.
The newsletter notes that, on the basis of the correspondence from the ombud’s office, the broker approached Mrs M and offered to compensate her for the additional excesses charged, which she accepted.