What to consider before agreeing to insurance contracts

2016-05-24 09:29
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Lyse Comins (File)

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THE Ombudsman for short-term insurance ploughed R100 million back into the pockets of consumers who refused to accept insurers’ repudiations of their legitimate claims over the past financial year.

Outgoing ombudsman Dennis Jooste received 9 784 complaints against short-term insurers, of which 48% related to motor insurance, 18% to homeowner insurance, eight percent to householder insurance, seven percent to commercial insurance and 19% to other types of insurance, according to his 2015 annual report released last week. He ruled in favour of consumers in 26% of cases closed, taking an average of 74 days to resolve disputes.

Insurers that attracted the most complaints included Absa, Hollard, Guard Risk, MiWay Insurance and King Price, although these companies also had some of the highest numbers of insurance claims.

I asked the new ombudsman, advocate Deanne Wood, to explain some of the concerns about insurance contracts and trends that Jooste had highlighted in his report, to help readers avoid the same pitfalls.

Topping the list was the way in which policy contracts are drafted both on paper and during verbal telephonic contracts, which are binding on both parties.

Consultants’ use of “hip and cool” language over the telephone, while effective for marketing, downplayed the reality that important terms and conditions were being negotiated, Wood said.

“We have moved from a space where insurance contracts were concluded with a broker more formally and terms and conditions were clearly explained, but now it is done over the telephone. When we listen to the calls it is a very colloquial conversation and I am not sure consumers always understand that terms and conditions are being negotiated,” she said.

Wood said there was a degree of caution about sitting down and signing a policy document that was lost when concluding a contract telephonically. She advised consumers to always ask insurers to e-mail the terms and conditions before handing over bank details.

“Companies breaking into the market have catchy swish sales conversations. A lot of colloquialism is used and it sounds like an informal chat and that is a concern,” she said.

“When consumers are asked ‘have you had any judgments against you?’ it is asked in a way that doesn’t suggest that this is a very important question and that if you don’t give me all the details you may find the policy doesn’t get paid out,” she said.

Wood said consultants and policy documents both used general phrases and did not always explain exclusions or situations where cover won’t be granted. She said consumers should ask lots of questions and be careful of hasty responses when lodging claims.

Wood added that she was surprised at how many insurers suspected alcohol consumption before a car accident.

“If you have been in a collision and before this you went to a restaurant, this is thoroughly investigated by the insurers. If they go to the restaurant, which assessors often do, they will ask to see the bill and the CCTV cameras, especially when it is a write-off,” she said.

“Often the assessors will try and lay a trap and they say, ‘Come on tell me you must have had a few beers, it was a Friday night’ and then the consumer says ‘yes I think I did have two beers’ and puts that down,” she said.

Wood said it was taking up to two years to get blood alcohol results from state laboratories, which made it ­difficult for consumers to prove their innocence and for insurers to investigate claims.

Cellphone insurance had also proved problematic as insurers would only pay out if the contract SIM was in the cellphone at the time the loss occurred. She said this was because consumers had lodged fraudulent claims.

“It is fair if it has been explained to the consumer and it is in the contract, but what is unfair is that particular term is not made clear in a lot of the contracts and the consumer doesn’t know,” she said.

“It is often the chancers who ruin it for everyone else and it makes insurers hyper-vigilant and honest but unknowing consumers find themselves without insurance,” she said.

Wood advised consumers not to be put off lodging insurance claims where the contracted period of time for claiming had lapsed because if there had been no prejudice claims could still be honoured. For example, if you are in a car accident and there is suspicion you had been drinking, and you lodge a claim 30 days later, the insurer is prejudiced because it is difficult to investigate.

“But if the claim is ‘the garage door shut on my car because the motor was faulty and I went on holiday and came back and it was 45 days later,’ they are not prejudiced,” she said.

• Send your consumer complaints to consumer@3i.co.za The ombudsman’s office can be contacted at info@osti.co.za or visit www.osti.co.za

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