High insurance claim rejections worry NBFIRA
The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) has expressed stern concerns over a rise in cases of insurance brokers failing to arrange appropriate cover for clients, leading to rejections of claims.
According to NBFIRA, complaints against brokers mainly stem from poor advisory services rendered to clients which lead to underinsurance of risks.
Speaking at Botswana Life’s recent Broker Connect Conference, NBFIRA CEO, Oduetse Motshidisi said despite strong financial returns for brokers over the years, there is a growing trend of complaints filed against them. These complaints intensified this year between the months of March and October, he said.
“The persistent type of complaint is the repudiation of claims and while insurance brokers are intermediaries between clients and insurers who bear the risk, the clear underlying trend with the repudiations is failure to make full disclosure to clients at the on-boarding stage and the lapse in informing clients of any changes or developments over the life of the policies,” he said.
Repudiation of claims in insurance terms means that claims fail to actualise due to misalignment between risks that occur and cover that has been purchased. Insurance brokers’ role in the market is to act as intermediaries between insurance companies and clients seeking to purchase insurance products.
In Botswana, there are 60 licensed insurance brokers and most of these offer advisory services to clients on which type of insurance products to purchase to protect their assets against risks. According to Motshidisi, this key role when deficiently performed by brokers leads to mass complaints against the latter.
“That responsibility squarely falls on the shoulders of the intermediaries and it needs to be performed scrupulously,” he said.
The insurance industry has been marred by diminishing confidence in the market due to delayed payment on claims and repudiated claims, which contributes to the country’s low insurance penetration rate. The low penetration rate speaks to a growing gap between insurance products that people are buying and what they need to be purchasing.
Botswana Life earlier this year revealed that the insurance gap in Botswana stands at 47%, meaning that many insurance products purchased by individuals do not cover the actual risk they face.