Almost half of insurance complaints to ombud from fed-up car owners

Consumers have won in only 18% of the more than 4,700 disputes about motor vehicle insurance claims before the Ombudsman for Short-Term Insurance last year.

Car insurance disputes comprised almost half of the about 9,800 formal complaints, according to the 2018 annual report of the ombud released today. The report also shows that within the category of motor vehicle insurance disputes, 74% were about accident claims that were rejected by insurance companies.

Of the 9,800 formal complaints, 48% was about motor vehicle insurance, 21% about homeowner insurance, and 5% about household contents insurance.

Consumers lost in most cases, with only 12% of homeower and 15% of household disputes resolved in favour of consumers.

The single biggest gripe from policyholders to the ombud’s office — in more than two thirds of finalised complaints across all categories — was about the insurer’s decision on claims, according to Ayanda Mazwi, a senior assistant ombud. It is clear that many policyholders do not know or understand what is in their policy documents, she says.

She says insurers are required by law (the Policyholder Protection Rules promulgated as regulations under the Insurance Act) to give you a policy document drafted in simple language.

Mazwi advises that you, the policyholder, must read these documents and if clarity is needed on any points, you must ask your insurer or broker to explain them.

She says the ombud’s office will consider all sales communications, both written and verbal, if a dispute relates to what you’ve been told when the policy was sold to you.

On the upside, complaints about insurers having rejected claims due to non-disclosure or misrepresentation by policyholders when they took out their cover declined by 22% between 2017 and 2018. There was also a 15% decrease in the number of complaints about insurers rejecting claims because of drunk driving.

Condition of property

Many homeowners were unhappy about their claims being rejected due to the condition of the property - a total of 48% of complaints in the homeowner insurance category were about this, according to the ombud's report.

The condition of a property relates to wear and tear, a lack of maintenance by the homeowner, defective design, construction workmanship and building material, explains Mazwi. She adds that as a policyholder you have a contractual responsibility to ensure your property is properly maintained and complies with applicable building regulations.

If the damage you claim for is attributed to the condition of your property, you may not receive payment, even if the event that leads to the claim would ordinarily be covered in your insurance policy, she warns.

Homeowners also complained about claims being rejected due to under-insurance, which is a real concern, Mazwi notes. Under-insurance means the sum you have insured your property for is less than it would cost to replace.

When you put in a claim to your insurance company, it will only settle your claim proportionately. For example, if the sum insured is R400,000 and the replacement value is R500,000, only 80% of your loss will be paid out.

Policyholders mistakenly believe that the municipal value, purchase price or bond amount is the correct value without taking into account inflating building costs, renovations and reinstatement costs, such as professional fees, demolition and debris removal, which can add up to 20% of building costs, she says.

It may be necessary for you to seek professional advice on the replacement value of your property. After all, for many of us our homes are our biggest assets, she says.

Within the category of household content insurance disputes, theft and burglary claims comprised 71% of the complaints, followed by 8% related to acts of nature, 6% to accidental damage, and 3% to damage caused by power surge.

The Ombudsman for Short-Term Insurance is responsible for providing consumers with a fair and transparent dispute resolution mechanism regarding disputes about short-term insurance.

In 2018, the ombud closed 9,474 complaints and recovered more than R87m in favour of consumers. This was roughly in line with 2017’s statistics where 9,962 complaints were closed and slightly more than R87m recovered.

The office finalised 65% of cases in four months, 20% of cases between four and six months, with 15% taking longer than six months.