How to stay on an insurer’s good side

Cancellation can have a detrimental effect on your future ability to obtain insurance.

When an insurance policy is cancelled, many consumers tend to see it as unfair. In most cases, this is because they haven’t fully realised that an insurance policy is a contract between the insurer and the insured. It aims to protect the insured against certain risks (for a premium) and the insurer relies on the insured to provide an accurate picture of the risk, based on answers to a set of questions.

The insurer bases the premium on that assessment. If the risk changes or the insured breaches some of the policy terms, it has the option to cancel the policy. If the risk turns out to have been higher than originally assessed, the insurer can void the policy.

By the same token, the insured is also at liberty to cancel the policy if they are dissatisfied, or have found a better deal. In that case, the insurer might make a counter-offer.

Most policies allow for a 30-day notice period, which gives both parties time to seek a solution. If there has been dishonesty, the insurer can cancel without notice.

There are three main causes for an insurer to cancel a policy:

Dishonesty. The insured wasn’t truthful about the nature of their risk profile, or made fraudulent claims. In insurance, utmost good faith is legally considered to be the default position on both sides.

Altered risk profile based on changed behaviour. Some people believe that once they’re insured, they can take less care of whatever has been insured. Reckless behaviour would result in a greater number of claims than the insurer had anticipated based on the original risk profile. The contract would no longer be an attractive business proposition for the insurer. A reputable company would contact the insured and advise them to modify their behaviour to bring their risk profile back into alignment. Only if this didn’t mend the issue, would the policy be cancelled.

Non-payment of premiums. When an insured party doesn’t pay their premiums for three consecutive months, the insurer is entitled to cancel the policy.

If you ever have a policy cancelled and you believe you’ve been treated unfairly, your first port of call would be the insurer’s own dispute-resolution team. If the matter isn’t resolved, the ombud for Short-term Insurance will provide an objective, specialist assessment of your case and offer relief if warranted.

Nthabiseng Moloi is MiWay’s head of marketing & brand