The Ombudsman for Short-term Insurance, Deanne Wood, recovered just under R100 million for consumers last year, only marginally less than in 2015, according to the ombudsman’s annual report for 2016, released this week.
Last year’s figure was R99 139 593; in 2015 it was R100 712 182.
These amounts are down from those recovered in 2013 (R118 937 888) and 2014 (R116 249 665), while the total number of complaints received by the ombudsman’s office has ranged from 13 278 in 2013 to 14 916 last year.
“The reduction in the rand recovery can be explained by the concomitant reduction in the number of files closed in 2016,” says Wood, who succeeded Dennis Jooste as ombudsman in March last year.
Of the 14 916 complaints received last year, 10 175 were registered as formal complaints, and of these, 8 631 files were closed. In 2015, of the 14 136 complaints received, 9 784 were registered as formal complaints, and of these, 9 944 were closed. In other words, 1 313 fewer complaints were closed last year than in 2015.
Wood reports that the average turnaround time per complaint “remains within commendable levels, at 91 days”.
More than a third of complaints were resolved in less than 60 days, and only 6% of complaints took more than 180 days to resolve.
The ombud’s office primarily deals with personal lines cover – in other words, insurance for individuals, such as vehicle, homeowner’s, household contents, and all risks cover. It has jurisdiction for personal lines cover up to R2m, except for homeowner’s claims, which can be up to R4m.
It has limited jurisdiction over commercial lines policies, although this type of insurance makes up a small percentage of complaints (7% in 2016).
Motor vehicle claims attracted the most complaints, at almost half of the complaints received by the ombudsman’s office last year (49%).
The report provides the claims and complaint statistics of all the 55 insurance companies over which the office has jurisdiction. From these you can get some idea of which insurers have more problem claims among their policyholders – particularly from the number of complaints per thousand claims and the overturn rate (which relates to when the ombudsman overturns an original claim decision by an insurer).
The ombudsman notes: “Where an insurer receives a high number of complaints per thousand claims, this may be an indicator that claims are dealt with unfairly by the insurer. However, this statistic should be considered in conjunction with the overturn rate. The overturn rate is an indicator that the decision of the insurer was changed in some respect by this office, with some additional benefit to the insured.”
But the ombudsman says the overturn rate should also be treated with caution, “as a high overturn rate may indicate a high degree of co-operation received by the ombudsman’s office from a particular insurer in resolving a complaint”.
The table provides the 10 insurers with the highest number of complaints per thousand. The average overturn rate among all the insurers was about 27%.
Although Compass Insurance had the highest complaints relative to claims (about 30 per 1 000), its overturn rate was relatively low, at 9.38%. Five of the insurers in the table, on the other hand (Western National, Oakhurst, New National, Absa and Standard) had relatively high complaints per thousand claims. In addition, they had above-average overturn rates.
Among the bigger insurers with the most favourable statistics on how they treat their policyholders’ claims are Constantia Insurance (1.07 complaints per thousand claims and an 11.36% overturn rate) and Outsurance (1.62 and 11.63%).
Wood says in her report that quality outcomes are essential to the proper functioning of an ombud scheme.
“It is therefore important that consumers feel listened to, are given a clear and accurate explanation of the outcome of their complaint and feel that their matter has been addressed in a fair, comprehensible, correct and impartial way.
“At the opposite end, insurers should feel confident that the office operates as an extension of their own quality assurance to their clients. Insurers are also entitled to have their positions heard and their reasoning and rationale properly considered,” she says.
Technology, social media changing insurance
In her address at the Johannesburg function this week marking the release of her annual report, Deanne Wood, the Ombudsman for Short-term Insurance, noted that technological advancements and the ever-increasing impact of social media have had a significant impact on the way in which the insurance industry operates.
“Consumers who may in the past have succeeded in taking a chance or presenting ‘alternative facts’ to insurance companies are often caught out by comments made on social media platforms,” she said.
“An an illustration, older drivers pay significantly lower premiums than younger drivers ... significant enough to encourage consumers to provide inaccurate information about who the regular driver of a vehicle will be. Our office sees far too many claims being submitted where, for example, parents have represented that they will be the regular driver of a vehicle when, in fact, the vehicle was purchased by them for use by their child.
“Simple desk-top investigations using Facebook or other social media searches can all too easily reveal misrepresentations made by consumers who forget to cover their tracks,” Wood said.
However, the ombudsman said she believes insurance companies could be doing more from their side to use technology at sales stage to assess the risk posed by the customer. “I am referring to underwriting information that could be easily accessible to insurers through database sharing or information pooling rather than obtaining it from consumers during sales conversations – for example, claims history or years of uninterrupted insurance.”
Wood said her office sees a large number of cases in which consumers provide sales agents with the wrong information simply because they could not accurately recall their claims history.
“In modern times where information of this nature is, or ought to be, easily ascertainable by reference to a database, there should be no need to leave the accuracy of such disclosure to the vagaries of human recollection,” she said.
A case study from the Short-term Insurance Ombudsman’s 2016 report illustrates that if you bluff your insurer, your actions will eventually catch up with you.
Mr A claimed for the loss of his car following what he said was a hijacking. His insurer, Mutual & Federal, rejected the claim, saying Mr A provided false information at the time of the claim and had failed to disclose important facts about his insurance history when he took out the policy.
Mr A reported that he had driven to visit a colleague five minutes away from his house in Khayelitsha. On the way home, he gave an old man a lift to a nearby suburb, Harare. After dropping off the old man and before he could drive off, he was approached by two men, who beat him up and hijacked the vehicle.
Mr A said the perpetrators had strangled him until he passed out. He later found himself dazed, walking to his cousin’s house.
On arriving at his cousin, Mr A did not contact the police or his wife. He said that his cellphone had also been stolen. The next day, his cousin helped him report the incident.
Mutual & Federal’s assessor confirmed during the investigation that Mr A did visit his colleague, but said Mr A gave a different version of the story compared with his report on the claim form.
Mr A’s vehicle was later found burnt out and badly damaged.
It was discovered that Mr A had submitted an almost identical claim two years earlier, which had been settled by a previous insurer.
Mutual & Federal argued that Mr A had failed to inform it when he took out the policy that he had had policies cancelled by two previous insurers. The insurer also argued that, in its view, Mr A had staged the hijacking.
The ombudsman upheld the insurer’s decision to reject the claim on the grounds that Mr A had not disclosed his insurance history at the inception of the policy and after taking into consideration the discrepancies in the circumstances surrounding the incident.