Has your car been stolen or hijacked? Your home ransacked? Provided you pay your insurance premium regularly you’re protected from the financial shock. Or so you think.
Thousands of insurance claims are rejected each year. Insurers that are quite happy to accept your monthly premium suddenly play hardball because of a few lines of small print in your policy document.
There’s nothing like a large claim to uncover administrative errors that render a policy void. In many cases the insurers’ decision to reject your claim is fair, but what if it’s not? How do you take the fight to your insurer?
Prevention: better than cure
Before we consider your options, let’s look at two ways to prevent insurance complications. The first is to be open and honest when completing your short-term insurance application.
Your insurer uses the facts you supply to determine the appropriate premium for the risk it takes on to cover your assets. You must supply accurate details about motor vehicle alarms, your residential area, whether your vehicle is locked in a garage or not, who the main driver will be, and so on.
Make sure you supply fair values for your household contents.
The second is to obtain and carefully study your short-term insurance policy document. Read the policy carefully and make sure the facts are correct and you comply with all its requirements.
If you misrepresent facts or fail to make an important disclosure when you purchase insurance your insurer has the right to declare your policy void ab initio at the claims stage. In simple English: the insurer cancels the policy because your dishonesty (intentional or not) resulted in an inaccurate assessment of risk when you purchased cover.
Let’s say you arranged insurance for your motor vehicle and told your insurance broker that the vehicle would be used for private use only. Months later you have an accident and the assessor finds out you actually use the vehicle for business, as a sales rep or similar.
Under the ab initio clause the insurer will refund you the insurance premiums paid up until the date of claim, but will not be liable for the damage to your vehicle.
Failure to value your goods (usually household contents) accurately has consequences too. If, for example, your household contents cover includes a collection of antiques, an independent valuation of the goods should be carried out prior to cover. At the claims stage the loss adjusters will draw up an agreement of loss based on this initial valuation and the actual loss incurred.
Remember, your insurer has the right to replace lost or damaged goods irrespective of the agreed value, so inflating values upfront isn’t going to help. The idea with insurance is to put you back in the same position you were before the disaster.
The best medicine
If you run into trouble, despite entering the insurance contract with due care, you have a battle on your hands. The first step is to try to resolve your dispute through internal channels with both insurer and insurance broker. Once you exhaust these internal dispute resolution channels there are a number of options available to you.
You can approach an attorney and implement legal proceedings against the insurer, seek assistance through the Small Claims Court (for disputes of less than R7 000) or lodge a claim with the Office of the Short-term Insurance Ombudsman.
The ombudsman is a voluntary scheme established to resolve disputes between short-term insurers and consumers fairly, efficiently and impartially. Disputes are resolved using the principles of fair dealing and equity and you could have success with your complaint even if there was a breach of policy.
From a time and money perspective it makes sense to lodge your complaint with the ombudsman. There are some conditions though. Your complaint must not be in the hands of an attorney or subject to litigation or arbitration, you must be sure that your insurer and broker have finally declined your claim and you must have tried — unsuccessfully — to resolve the complaint through your insurers or insurance broker’s internal complaints mechanisms.
Your complaint must centre on your own “personal lines” insurance and not involve statutory third party, industrial or commercial complaints. The ombudsman has the power to make rulings against an insurer up to a maximum of R800 000 and — in the event the ombudsman cannot help you — you still have the right to institute legal proceedings.
The office has agreed with insurers in the scheme that contractual prescription doesn’t run while a complaint is open.
The process is fairly simple. Application forms to lodge complaints are available at the ombudsman’s website, www.osti.co.za. You can also contact the office directly on 0860 726 890, by fax on 011 726 5501, or by email on [email protected].
The office is at: 2nd Floor, JCC House, 27 Owl Street, Milpark, Johannesburg.
How much will it cost?
It’s extremely expensive to challenge an insurer in court and the Small Claims Court requires that you pay a sheriff’s fees.
The ombudsman’s services are free of charge. Time does become an issue. The ombudsman says the average complaint is finalised in three months, though some cases take much longer.
If you’re in any doubt over the validity of your insurer’s decision to repudiate your claims, this wait can be worthwhile.
The ombudsman has retrieved more than R113-million for slighted short-term insurance consumers with 37% of previously rejected insurance claims overturned.