Frustration as consumers' benefit claims get rejected amid pandemic

Thuli Zungu Consumer Line
Self-employed people should consider other short-term insurance contracts that provide insurance protection for business interruption, expert advises. /123RF
Self-employed people should consider other short-term insurance contracts that provide insurance protection for business interruption, expert advises. /123RF

While millions of consumers could benefit from the Unemployment Fund and Credit insurance benefit, some are shocked at the discovery that their employers never contributed their UIF portion to the fund and that their credit insurance benefit does not cover them.

Consumer line has also received complaints from self-employed people who thought they could benefit from their respective credit insurance benefit, only to have their claims repudiated.

Lindokuhle Ngcobo, who started her business in May last year and has been doing well until the Covid-19 lockdown, said her claim was rejected because she did not fall within the definition of people who are unemployed and has lost the ability to earn income.

Ngcobo, 42, of Mofolo South, said it was not her fault or action that there was a pandemic and felt that her insurance cover was discriminatory because it excluded self-employed pool and the Covid-19 regulations were harsh on self-employed people.

Anton Davies, who heads the credit solutions at Nedbank, said many consumers have been frustrated when their claims have been turned down or when they discover that their cover amount is not what they had hoped to be.

He said those with valid credit life insurance could have their monthly debit payments covered for up to 12 months, depending on the circumstances.

Davies said self-employed people may have to face added challenges.

For self-employed people, even if they have a mandatory insurance which includes an unemployed or unable to earn an in income benefit, this cover is limited to people who are employed and lost their ability to earn an income.

"The regulations have a specific exclusion for self-employed people from being able to claim if they are unable to earn an income," Davies said.

He said the regulations provide some reprieve in that self-employed people should not be paying for benefits which they cannot claim.

Davies said this problem is attributable to defining when a self-employed person is unable to earn an income.

"Without such a clear definition, insurers are unable to offer this cover to the self-employed. So, it is advisable for self-employed people to consider other short-term insurance contracts that provide insurance protection for business interruption," said Davies.

He said while Nedbank only requires mandatory insurance for its personal loan product, they are aware of the imperative highlighted by Covid-19 to provide credit insurance cover to self-employed people.

They are investigating appropriate solution for this challenge.

For people like Ngcobo, Davies said they have found ways in which they could help them.

In the interim, and based on the unique challenge created by the Covid-19 for all their clients, Nedbank has responded by relaxing the cover requirements for their policyholders, he said.

"For example, where the policy requires a total loss of income for a policyholder to be able to claim, we are offering partial benefit to those clients with mandatory cover, including self-employed people," Davies said.

He said to qualify, clients must have lost more than 20 percent of their income due to Covid-19.

"Intend of no relief, unless there is 100 percent loss of income, we will allow partial relief to partial loss of income," Davies said.

He said Nedbank has also waived the waiting period where claims are a direct result of Covid-19 pandemic in an effort to get financial help.

Davies encourages consumers to make their claims even if they are not sure about the status of their cover.

He said credit life cover is not always compulsory. Davies said some and not all credit loans will only be offered on condition that a consumer borrowing money agrees to take out credit insurance.

" This is not required by law, but many credit providers insist on it before they will provide a consumer with the credit they want."

To protect the consumer, the National Credit Regulator implemented rules to govern a mandatory credit insurance agreements.

He said the most relevant rule at this time of Covid-19 is that these mandatory policies must include an unemployment or unable to earn an income benefit clause.

"This is the cover that pays some or all of consumer's credit payments if they are unable to earn an income for a period of time due to no fault or action of their own, which is the case for many employed people during the Covid-19 lockdown period," he said.

Davies said that the unemployment or unable to earn income benefit is not required by law to be automatically included in optional insurance policies.

"Most credit insurance policies include a death benefit as building block and offer other policy covers such as permanent or temporary disability, retrenchment, critical illness and hospitalisation and not unemployment or inability to earn income benefit," he said.

Those policies that include it often come at a much high premium, Davis said.

He encouraged clients with credit insurance to lodge claims, but said this does not team they automatically qualify get the cover during the Covid-19 pandemic.

"Consumer's eligibility depends on the type of credit they have," he said.

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