The Insurance Ombudsman’s office adjudicates and seeks to resolve complaints lodged against insurers by policyholders who believe that they have been unfairly treated by an insurer. The vast majority of these relate to claims disputes with a small percentage relating to service issues. The brief overview that follows is confined to short-term insurance only. The Office of the Long- Term insurance Ombudsman (OLTI) deals with complaints relating to life and disability assurance, funeral and credit life insurance. It has been swamped with complaints relating to the Covid-19 pandemic, but that is beyond the scope of this brief article.
The complaints received by OSTI relate predominantly to Motor Vehicle, Homeowners (Buildings insurance) and House Contents insurance, including ‘All Risks’.
Dealing first with Motor Vehicle claims, a lot of these are initially rejected by insurers placing reliance upon the reasonable precautions clause which is a general exclusion contained in most short-term insurance policies. It refers to the insured’s obligation to exercise due care concerning the insured vehicle and to prevent loss. An example of failure to comply with this is not maintaining the vehicle in a roadworthy condition, for example, where it is alleged that an accident was wholly or partially caused due to smooth tyres or defective brakes or lights, to name just a few. In many of the matters that were considered by OSTI in 2020, the insurer’s decision to decline liability was based on allegations that the insured was driving over the regulated speed limit or driving under the influence. However, many insurers have traditionally relied upon insufficient circumstantial evidence to justify rejections based on these grounds, in which case OSTI would overturn the insurers’ decisions. However, the bottom line is that vehicles need to be maintained in a roadworthy condition at all times and any action which would expose a vehicle to a greater-than-normal probability of loss or damage must be avoided. An example of this would be to park the vehicle overnight on the street. A further source of many complaints was non-compliance with a security requirement, usually a tracking or immobilising device. Where an insurer has this requirement in a policy, it is not enough to merely have fitted a tracking device – it must also be maintained and regularly tested as per the service providers’ recommendations and, needless to say, the monthly subscription must have been paid up to date at the time of a theft or hijack loss. Non-disclosure and/or misrepresentation of any material fact can -and usually will – lead to a claim rejection. Typical examples are failure to disclose past claims history (non-disclosure), or where a policyholder claims to be the main driver of a vehicle when in fact it is mainly driven by his 20-year old son (misrepresentation).
As regards Houseowners claims complaints, 54% of claims dealt with by OSTI under this category related to claims for damage caused by acts of nature, largely storm-related damage. With changes in the weather patterns, it is anticipated that catastrophic storm-related claims will become more and more prevalent. The primary cause for the complaints, at 47%, was the rejection of claims based on policy exclusions for damage caused by defective design, construction or workmanship, wear and tear, and lack of building maintenance. Many policyholders still mistakenly believe that this type of insurance will cover not only resultant damage from ingress of water, wind, etc, but will also cover rectification of whatever led to such an event when it might have otherwise been avoidable. A typical example is where water enters the roof void due to gutters or roof valleys clogged with leaves and other debris, or where a roof leaks. This type of insurance is not a substitute for repairs due to wear and tear, or for general maintenance. Generally, an insurer is under no obligation to inspect the property before the commencement of an insurance policy since insurance contracts are entered into in good faith. It is the insured’s responsibility to ensure that the building is properly maintained and structurally sound. Not mentioned in the report, but something which we as brokers have encountered, is the existence of a thatch lapa close to the main house which had not been disclosed. Thatch structures introduce an increased degree of hazard as fires are often caused by lightning strikes or fireworks and can spread to the main dwelling if sufficiently close. Often this will not affect anything provided there is sufficient separation between the lapa and the main building. However, if in any doubt, disclose this fact to your broker or insurer.
In the Household content insurance category, disputes arising from theft and burglary claims comprised 55% of complaints considered by OSTI under this category. Complaints relating to damage caused by power surges will remain a concern for consumers during periods of load-shedding. This event is excluded from the cover in some household content insurance policies, so it is vital to take necessary steps and precautions to prevent or minimise such damage. Yet again, non-compliance with a security requirement such as a burglar alarm is a major cause of claim rejections. Alarms must be regularly maintained and tested and always activated whenever the premises is left unoccupied. Where it has been stated when making application for insurance that windows are barred, or external and sliding doors are protected by bars or security gates and this is found not to be the case at time of a claim, it will usually result in a rejection. Under-insurance which normally only comes to light after a claim and results in a reduced settlement was another major source of complaints. This cover is nearly always based on new replacement value of the entire contents of the residence and as such it is paramount that values are regularly updated. This is particularly relevant where imported goods are concerned due to currency fluctuations. We have an inventory form which will assist in determining an accurate replacement value.
Finally, All Risks insurance covers items which are often removed from the residence and hence are at greater risk of loss or damage. Typically, these are portable electronic goods such as mobile phones, tablets, laptops, jewellery/watches, bicycles and other sporting equipment. Many claims for jewellery are either rejected or reduced in the absence of a fairly recent invoice or valuation certificate. Many insurers will not cover losses where items are stolen from a vehicle following ‘remote jamming’ incidents. Mobile phones are frequently upgraded, and new details not notified to the insurer. Most will overlook this and provide indemnity based on the value of the previous phone, but that will generally be a lot less than the value of the replacement item.
As can be seen, insurance can be a potential minefield and whilst the examples mentioned above cover a few of the major causes of claim rejections, it is imperative that policyholders read all documentation thoroughly and ask questions where there is any doubt or lack of clarity. It is our role as brokers to assist you with this. The golden rule is: WHEN IN DOUBT, ASK OR DISCLOSE.