Vehicle claims top complaints to ombudsman

Motor vehicle claims were rejected mainly because the insurer believed the policyholder had been driving drunk or had provided misleading information when the policy was underwritten. reports QUICK STATS

MOTOR vehicle insurance claims continue to be the main source of complaints to the office of the Ombudsman for Short-term Insurance, according to the ombudsman’s annual report for 2017, which was released last week. Just under half of complaints last year related to motor vehicle policies, and over R45 million of the R87m the ombudsman’s office recovered for consumers went to motor vehicle policyholders.

Despite the number of complaints across all insurance categories remaining more or less constant at between 9 000 and 10 000 over the past four years (the office received 9 097 complaints in 2017), the amount recovered for consumers has slowly decreased

(see graphs), with a corresponding drop in the overturn rate, from 30.78% in 2014 to 20.14% last year.

The overturn rate is the percentage of complaints in which an insurer’s decision on a claim has been overturned by the ombudsman in favour of the consumer. This occurs when:

• The insurer’s decision is overturned by the ombudsman by way of a recommendation that is accepted or by way of a final ruling; or

• A resolution of the dispute has been mediated by the ombudsman, with the consumer receiving a benefit that he or she would not have received without the ombudsman’s intervention.

The ombudsman, Deanne Wood, cautions in the annual report about reaching conclusions on the decline in cases in favour of the consumer.

“An initial assessment might seem to suggest that in 2017 insurers were more correct in their claims assessments than in previous years. Or, more worryingly, that the ombudsman was less willing to challenge insurer’s decisions and more susceptible to industry bias.

“However, neither of these assessments are accurate. The decline in the overturn rate can primarily be explained by the material shift in some insurers’ approach to this measure and to what it represents for their organisations.

“A misperception exists that a low overturn rate indicates an insurer’s service excellence.

This is, in fact, not the case. A low overturn rate can have a number of meanings. It can indeed indicate service excellence and a • Formal complaints received: 9 097

• Formal complaints closed: 9 962 • Amount recovered for consumers: R87 101 354 • Average turnaround time: 131 days

• Calls received by call centre: 77 660

• Insurance companies in ombudsman scheme: 51

Complaints by category

• Motor: 49.3%

• Homeowner’s: 20.4%

• Other (including cellphone insurance and travel insurance): 16.1%

• Commercial: 7.9% (ombudsman has limited jurisdiction) • Household contents: 6.2% general trend towards making the correct decision at the outset. But, importantly, it can also be indicative of inflexibility, dogged decisionmaking and an unwillingness to be tractable and to treat each complainant as an individual when considering the merits of a complaint,” Wood says. Equally, a high overturn rate may indicate willingness on the part of an insurer to defer to the ombudsman.

According to the report, quoting figures provided by the Financial Services Board, more than 3.2 million short-term insurance claims were processed by the companies falling within the ambit of the ombudsman in 2017. Eleven companies processed more than 100 000 claims each, and these companies represent about two-thirds of the complaints to the ombudsman (see table). The average complaints per thousand claims for all insurance companies was 2.4.

MOTOR VEHICLE CLAIMS

Senior assistant ombudsman Ayanda Mazwi says in the report that 74% of the motor vehicle complaints involved accidental damage. Most accident claims had been rejected on the grounds that the policyholder was driving under the influence of alcohol, she says.

“Some insurance companies have introduced measures such as the ‘take me home’ service to manage the risk associated with drunk driving. However, it is clear from this year’s statistics that driving under the influence remains a very real problem for the South African insurance industry.”

The second highest cause for complaints was rejections based on a policyholder’s alleged misrepresentation of underwriting details at sales stage. “Examples include misrepresentations about regular driver details, previous insurance and claims history, credit history, security devices and whether the vehicle would be used for personal or business use.

“The ombudsman has always highlighted the importance of truthful and accurate information being provided to the insurer during underwriting,” Mazwi says.

She says other complaints related to rejections based on the policyholder’s obligation to exercise due care and to prevent loss, while complaints relating to quantum disputes (the amount of the payout) were also high.

“These disputes frequently relate to the settlement calculation in respect of a total-loss claim, that is, when the vehicle has been stolen or written off. The calculation may result in a shortfall where the vehicle is financed,” Mazwi says.

Warranty and mechanical breakdown claims comprised 9% of complaints. “We have noticed that the cause of these disputes often arose from the insurer’s advice provided at sales stage,” she says.

HOMEOWNER’S AND HOUSEHOLD CONTENTS CLAIMS

Given the extreme weather conditions experienced in 2017, “it’s not surprising to report that 61% of complaints under homeowner’s insurance related to storm damage and other acts of nature”, Wood says in the report.

Theft and burglary claims comprised 73% of the complaints in the household content insurance category.

martin.hesse@inl.co.za