R386m paid to complainants who asked insurance ombuds for help

Claims relating to cars made up about 40% of complaints lodged by policyholders to the ombudsman for short-term insurance (Osti) last year, most involving accident-related claims rejected because of an exclusion in the policy.

Osti and the ombudsman for long-term insurance (Olti) this week published their annual reports for 2023.

These will be their last, as the two ombuds have been incorporated into the National Financial Ombud Scheme South Africa (NFOSA).

Among the exclusions which most often see claims rejected is speeding at the time of the accident.

Sometimes insurers play the “speeding” card without justification. In one such case, Osti adjudicators found in favour of the insured who was alleged to have been speeding, recommending the insurer reverse its decision not to pay the claim.

But the insurer — unnamed in the report — refused, resulting in further investigation and a binding “formal ruling”, one of only two during 2023, both involving the same insurer.

The complainant said he was driving on a dirt road, approaching a slight bend, when the back wheels lost traction and the car hit a bank and overturned.

The insurer used the “failure to take all reasonable steps and precaution to avoid the accident” reason to reject the claim, alleging his driving speed at the time was found by their appointed accident investigator to be 87km/h on a road where the speed limit was 40km/h and that contributed to the accident.

The complainant did his own investigation, which revealed the 40km/h speed limit sign was 400m beyond the accident scene, facing the opposite direction, and his own trip log report put his speed at 63km/h just before the accident, in a 60km/h zone.

Osti overturned the insurer’s rejection of the claim and issued a final ruling for the insurer to settle the claim, which it did.

That case made up part of the 16% of cases in which Osti overturned an insurer’s decision, with a resultant benefit to the policyholder; down from 18% the previous year.

A few hundred claims were rejected on the grounds of “misrepresentation” or non-disclosure at the time of taking out the policy or during the term of the policy and at the claims stage.

In other words, lying on the part of the policyholder; such as about who the regular driver is, to avoid a high premium when the policy is taken out, or padding a housebreaking-related claim.

The second biggest category of complaints, about 25%, related to rejected homeowners’ claims, mostly involving damage caused by acts of nature and declined on the basis of gradual deterioration, lack of maintenance and wear and tear, followed by defects in design or construction.

Asked how the ombud’s office goes about determining such cases when the damage was caused during an abnormal weather event such as severe flooding or a tornado, Osti CEO Edite Teixeira-Mckinon said in the case of severe storms insurers were required to prove the “proximate cause” of the damage was the owner’s failure to adequately maintain the property rather than the severity of the weather event.

The Osti report also mentioned claims rejected as a result of power surges due to load-shedding.

“Most insurers have changed their working to exclude grid failure coverage as well as to restrict claims as a result of power surges after load-shedding,” said Christelle Coleman, CEO of Ami Underwriting Managers.

Coleman said it seemed many policyholders were not aware of these changes and expected cover for damage caused by power surges.

“Consumers will battle to find cover for power surges as a result of load-shedding now, because the claims have become severe: huge volumes and some big losses.”

Moving to the Olti’s 2023 report, a funeral policy claim rejection case considered by that office highlights the disconnection between the strict legalese of insurance contracts and the concept of ubuntu.

A woman took out a policy of Emerald Life, covering her “sister”. When the “sister” died in December 2022, the woman lodged a claim on the policy but it was rejected because the woman referred to as her sister was not her biological sister and did not fall under the policy’s description of “extended family”.

It was revealed that the complainant’s mother, a single parent, died when she was young and the deceased’s mother had raised her as her own child, with the result she and that woman’s daughter regarded each other as sisters. Emerald Life rejected that explanation, saying growing up with the deceased and having a clan name connection was not sufficient for the deceased to qualify as a sister.

Olti’s investigation of the case revealed it is not inconsistent with the bill of rights for people to adopt a child in terms of Xhosa customary law and not in terms of civil law.

“No law of general application declares unlawful a person’s right to adopt a child by customary law.” Also, Olti said, “it is desirable and necessary to infuse the law of contract with constitutional values, including values of ubuntu, which inspire much of our constitutional compact.”

It would be against the spirit of “ubuntu” for the insurer to escape liability solely on the grounds that the relationships had no biological aspect, Olti contended.

“If it was the insurer’s intention to require a biological connection it should have made provision for it in the policy.”

The insurer rejected Olti’s provisional ruling, which led to a final ruling stating the deceased qualified under “other relatives” and the insurer was liable to pay the benefit. Which it did. (Olti only names insurers if the case proceeds to a final ruling)

THE NUMBERS

Osti and Olti jointly placed more than R386m in the hands of complainants during the 2023 financial year.

Olti recovered R283m for complainants in lump sums (an average of R1.14m per working day, considering there were 248 working days in 2023) and an additional R727,838 was awarded in 169 cases as compensation for poor service.

Osti recorded R102m as the monetary benefit and value for consumers who approached the office for assistance.