Durban’s drowned and Cape Town’s still smouldering, but you’re all right – you’re well insured. Or are you? Gavin Foster looks at some disputes between insurers and their clients
‘One of the problems is that people today often buy their insurance directly from the companies rather than use a broker,” says Michael Bennett, the South African Ombudsman for Short-Term Insurers. “The broker would normally assess their circumstances and advise them what sort of cover they need.”
Buyers often don’t even read through policy documents and have no idea what cover they have bought. A typical problem arises with the small businessperson who operates from a spare bedroom converted to a home office. There is a fax machine, a computer and all the other paraphernalia needed to do business. Then comes the flood, and everything’s buried in mud. The assessor sees the office equipment. “Sorry,” he says. “Yours is a domestic not a business policy.” Because the claimant never read the fine print in the policy document a significant portion of the claim is repudiated.
The same applies to your car – use it for business purposes and you could find you have no cover because your policy explicitly excludes business use. There’s no point arguing that you were using your vehicle for a private matter when the accident occurred – your claim will probably be rejected.
Under these circumstances the ombudsman could be on your side. “If you used your car for your business only occasionally but were clearly not doing so when the accident occurred, I would probably tell the company that their objection was irrelevant, and find for you,” says Bennett.
The ownership of goods damaged on insured premises can also provide grounds for a claim to be repudiated. “If you store goods belonging to somebody else, even though you may have an insurable interest in the damaged or lost property, you will find your claim rejected if you haven’t disclosed that to your insurer,” says Bennett.
Many disputes brought to the ombudsman are decided in favour of the insurer because the clients are underinsured. But with motor vehicle insurance the opposite is often the case. People fail to lower their car’s insured value as it ages, and then complain when the insurer pays out the book value rather than the insured value of the vehicle after a write-off. “It doesn’t matter what value you’re paying premiums on,” says Bennett. “That figure is the maximum they’ll pay. That’s why it’s important to adjust your insured value every year. You’re wasting money paying premiums on an amount greater than the car’s real worth.”
But establishing a vehicle’s replacement value can be a headache, and this is where the claimant can often turn down the insurance company’s settlement offer. “It depends entirely upon the conditions of the policy,” says Bennett. “If it states nothing to the contrary they’re obliged to pay you what the market value of the car was immediately before the incident. But market value is always open to debate.”
Insurers generally work according to the book value in the trade guide Mead & McGrouther, and if your policy specifically links the pay-out to this then you’re committed. If not, you can argue the point. “You might produce evidence that your car was in outstanding condition … and that similar cars have been traded at higher prices than the book value. Then you can fight for a larger pay-out.”
When your car’s being repaired after an accident it’s also worth keeping an eye on what’s going on in the workshop. Assessors will sometimes insist on second-hand spares being fitted, and as long as these are in as good a condition as the originals were before the accident you can’t complain. But if the panelbeater fits four-year-old panels to a one-year-old car after removing surface rust you can object.
The same applies to “pirate” parts. Insurers sometimes authorise the fitting of cheaper non-original parts. “If they’re of inferior quality … then you have every right to insist upon genuine parts being used for the repair.”
The South African Ombudsman for Short-Term Insurers can be contacted at (011) 339-6570