The ombudsman for Short-term Insurance (Osti) celebrated another year of balancing the powers and duties of insurers, on the one hand, and consumer rights and obligations on the other by recovering more than R87 million for policyholders.
The Osti 2018 annual report confirms that insurers were instructed to offer compensation in 18% of the 9 474 complaints finalised last year.
The spread of policyholder complaints reflects the broader short-term insurance marketplace with 48% of finalised cases falling under the motor vehicle insurance category, followed by homeowner’s insurance (21%), commercial insurance (9%) and household content’s insurance (5%). Successful motor vehicle complaints accounted for more than 60% of the total recoveries, at almost R53 million.
A deeper dive into the statistics proves telling insofar complaints in the motor vehicle claims environment.
Ayanda Mazwi, a senior assistant ombudsman, revealed that 74% of the complaints were for accident-related damage, 9% for warrant and mechanical breakdown disputes and 8% for theft and hijacking claims.
In most cases, complainants felt that the settlement amount offered by their insurer was too low.
Many factors contribute to disputes in this area, including the method used by insurers to calculate vehicle and/or salvage values, uninsured credit shortfalls, uninsured accessories, the application of excesses and the use of non-original equipment or used replacement parts in repairs.
A secondary cause for complaints is the alleged non-disclosure or misrepresentation of details by policyholders when buying an insurance policy.
It is hard to resist using the individual insurer statistics published in the report to compile a list of the best- and worst-performing insurers, but the Ombudsman for Short-term Insurance, Deanne Wood, has frequently warned against this: “Statistical results are not necessarily indicative of (insurer) performance - an insurer who scores a low overturn rate or has a low number of complaints submitted to this office is not necessarily the ‘best’ insurer.”
The statistics do reveal the number of matters adjudicated, per insurer, where the insured received some benefit as a result of the Osti’s intervention.
The figure is split in two to show where resolution was received consensually and through discussion or conciliation with the insurer versus where Osti was required to make a recommendation or ruling in order to compel compliance from the insurer.
The overall overturn rate was 18% for last year, which means the scheme presided over corrective action against short-term insurers in only 1589 complaints out of the 3.5 million claims registered industrywide - or one intervention per 2200 claims.
Wood commended her team for their efforts to improve the office’s complaints resolution capabilities. The implementation of paperless complaints handling, automation of IT processes, redesign of complaints handling procedures and relocation to “easy access” premises in Rosebank all contributed to a reduction in the average time taken to resolve a dispute, from 131 to 104 days.
Other notable developments stemmed from South Africa’s evolving regulatory environment.
“In anticipation of the new regulatory and legislative framework we initiated an in-principle agreement with the Long-term Insurance Ombudsman to amalgamate the two schemes into a single Insurance Ombudsman Scheme,” said Wood.
The move, expected to take place after September, will align the scheme with Chapter 14 of the Financial Sector Regulation Act and improve financial consumer outcomes over time.
The best advice tucked away in the annual report’s 40-odd pages came courtesy of Osti’s team of legal interns who unpacked some of the common misunderstandings they encountered.
Their stern warning to policyholders was to avoid complacency about insurance policy terms and conditions: “We urge all consumers to read and understand the terms of their policies and request their insurers (or insurance broker) to clarify any issues they might have.”