File picture: WikiMedia Commons.
File picture: WikiMedia Commons.

Insurance Ombudsman recovers R95 million for policyholders

By Martin Hesse Time of article published Jun 1, 2020

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The Ombudsman or Short-term Insurance, or Osti for short, recovered R94.9 million for consumers in 2019 after intervening on their behalf in complaints about short-term insurance claims. This is more than the amounts recovered in 2017 and 2018 (each about R87m), but less than what consumers got back in 2015 and 2016 (about R100m and R99m respectively).

These statistics, among others, were published in the ombudsman’s annual report for 2019, which was released this week.

Deanne Wood was the ombudsman in 2019. However, at the end of the year Wood stepped down, and long-term insurance ombudsman Judge Ron McClaren became head of both short-term and long-term ombudsman offices.

Wood’s office received 10 367 complaints last year, of which 9167 were closed. Almost half of the complaints closed - 4 492 (49%) - were for motor vehicle claims. The second-highest category was homeowner’s (building) insurance (1 843, or 21% of complaints closed). House contents insurance complaints were relatively low (551, or about 6% of complaints closed).

Motor vehicle claims

In the area of motor vehicle claims, 19% of disputes were resolved in favour of policyholders, with the ombudsman’s office putting R47 701 385 back into claimants’ pockets.

Senior assistant ombudsman Ayanda Mazwi said that, of 4 492 vehicle claim disputes, 73% were for accident damage. Complaints involving warranty and mechanical breakdown claims comprised 8%, and complaints involving theft and hijackings comprised 8%, being “consistent with previous years”.

Mazwi said most motor vehicle complaints were disputes over settlement amounts calculated by insurers. She said most of these disputes related to vehicle credit shortfall and uninsured accessories.

Mazwi warned consumers that an insurance payout would not necessarily cover the amount owed to the bank on their vehicle.

“Vehicle credit shortfall is the gap between the vehicle’s insured value and the amount owing to the finance house. Should a vehicle be stolen or written off in an accident, the vehicle’s credit shortfall can be crippling, as the consumer is left owing money on a motor vehicle that he or she no longer has.

“Consumers must, therefore, ensure that their policies include cover for the credit shortfall and any financed accessories which have been added to the insured motor vehicle,” she said.

Homeowner’s insurance

In this category, 268 (15%) of the 1843 disputes considered were resolved in favour of policyholders, with a recovery of R14 653 628.

Mazwi says in the report that 54% of complaints related to claims for damage were caused by acts of nature, largely storm-related. This figure dropped from 58% recorded in 2018.

In 30% of complaints, the insurers rejected claims in which wear and tear, gradual deterioration and lack of building maintenance was the cause of the damage, she said.

Typically, wear and tear, gradual deterioration and loss through the property not being maintained properly are not covered under a homeowner’s policy.

“While this cause for complaint declined by 18% when compared with 2018, this rejection reason continues to be the main basis for consumer dissatisfaction in homeowner’s insurance.”

Mazwi said if damage was attributed to the poor condition of the property, the claim may be rejected, “even if an insured event did occur”. However, she said the burden of proof lay with the insurer, who should establish a connection between the condition of the property and the damage.

Anticipated spike

Although the report does not cover 2020 operations, it does refer to an expected surge in complaints related to the Covid-19 pandemic, particularly in the areas of business disruption and travel.

Osti chief executive Edite Teixeira-Mckinon said there were signs that 2020 would be very different from previous years: “Up until the end of March, we received, year on year, substantially more complaints. But in April we saw a decline in complaints, and that was predominantly because 49% of our complaints are from motor vehicle claims. With less vehicles on the road, there are less claims and therefore less complaints,” she said.

Teixeira-Mckinon said the office was well prepared to continue functioning during the lockdown.

“We are equipped to continue registering and resolving complaints from home. The fact that we can continue to offer the same services that we have in the past is important. We are still here for insurers and consumers,” Teixeira-Mckinon said.

See here for the full report.

PERSONAL FINANCE 

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