cash
Insurance companies are paying claims in vouchers rather than cash, writes Ferial Haffajee
The trauma of being mugged, having your car stolen or house broken into can be assuaged by the thought that if you’re fully insured, you should soon be getting a payout to replace your lost belongings.
But when you lodge an insurance claim, you might be surprised to discover that the payout comes in the form of vouchers.
It’s becoming increasingly common practice for short-term insurers to pay clients with store-specific vouchers instead of cash.
With growing crime and a high incidence of fraud, the industry claims that this is “sound business practice”.
They win bulk-buying discounts from companies and claim clients are not prejudiced as long as they receive the same goods that were stolen.
On the flip side, you are stripped of your freedom of choice to buy where you want or to replace your stolen goods with something different – and use of vouchers is not always made explicit.
Insurers say that contracts provide that the policyholder will be put “in the same position prior to the theft or other incident”.
Caroline da Silva of the South African Association of Short Term Insurers says this can be done either by a cash payment, replacement or repair – and that decision is made at the discretion of the insurer.
She adds: “Some companies take a strong stance against cash payments.” In fact, if you push for cash, this is often regarded as a “fraud indicator”.
The voucher system reduces fraud, says the industry, because there’s no gain in claiming that goods have been stolen if all you’re going to get is a duplicate product.
The voucher system is managed largely by a company called Scheme Data Services (SDS) which cuts deals with a range of retailers.
Claimants are given vouchers which they can exchange for the stolen goods at SDS’s participating stores.
But policyholders should be on the prowl for claims administrators who punt certain stores. There are in fact a range to chose from, so don’t settle on the one an administrator says you have to. Also, hold out for cash if you want to go shopping where you want, although it’s going to be a long haul.
“It’s a question of negotiation,” says Angelo Haggiyannes, the director of Hotline Administration Services which does the claims management of Auto & General.
He says that the company may then pay half the claim in cash and half in vouchers.
You are also entitled to take the voucher back to the insurance company for a refund if you cannot find the product you need to replace at the store you’ve been sent to.