Five reasons claims may not be paid out
ACCORDING to the PWC 2015 Insurance Industry Analysis, more South Africans than ever before now have some sort of short-term insurance policy in place.
“The number of insurance claims people are making has increased. However, we have also seen an increase in the number of claim repudiations,” says Bertus Visser, chief executive of distribution at PSG Insure.
“The reasons for the increase in claims submitted but not settled by insurers can be difficult to determine, or to put down to a single factor,” he adds.
Visser says in PSG’s experience it can be due to some of the following issues:
The insurance policy lacks specificity – these are typically claims where appropriate cover for a specific item was not taken out, or when insurable items are not specified correctly. Underinsurance can be an issue as well, affecting both building and contents insurance. Claims will only be considered to the percentage you have insured for. If you buy or inherit something after your policy has been drawn up and signed, you can encounter problems if you need to claim unless you update your policy. Include any new items you need insured, as soon as you own them. is not carried out on your property. Home improvements, such as adding green features like solar panels or a generator, might not be covered if the policy is not amended to include them specifically.
Lack of proof of ownership – it is also important to note that if you can’t prove that you owned an item, it may not be replaced. An example of this could be if you have no proof of serial numbers on electronic equipment.
Non-compliance with security – burglary claims are often rejected if you don’t comply with the security requirements set out in your policy. For example, an alarm clause in a policy may include that an alarm system must be installed; that the system must be linked to a 24hour rea ction unit; that it must be maintained and in good working order; that the alarm must be activated when the dwelling is unoccupied, even for short periods of time like going to the shop or dropping the kids at school; and that the system may not be removed without the insurer’s consent.
Visser says that to ensure that your claims are successful, it’s important to make sure your insurance policy is up to date and specifies exactly what you need cover for. Equally important is making sure that you adhere to the terms and conditions of your policy. THE costs of insurance is one of the biggest bugbears for many businesses, but those that under-insure or purchase inappropriate cover run the risk of substantial losses, according to Bryan Verpoort, head of corporate and business insurance at Standard Bank.
He says economic conditions remain extremely tough and many businesses are looking to cut costs. Insurance costs are being scrutinised as a result, but a common mistake is to then become exposed to risks that can ultimately destroy a business.
“We see this quite often with businesses that rush to take out off the shelf policies. This fails to take into account the environment and evolving risks for businesses, like labour unrest or political unrest in a foreign country,” says Verpoort.
He says the national adviser networks are expected to play an increasingly important role in finding the best solutions to the insurance needs of companies. Lower premiums can be achieved as these advisers shop around for the most appropriate coverage at the best price and can also tailor solutions for specific needs and localised business or trading conditions.
“Going direct is not always what it seems. It is sometimes better to avoid general policies as there is a growing need for more specialised coverage,” says Verpoort, who runs Standard Bank’s growing network of insurance brokers with expertise across Africa.
“Companies are often not insuring themselves for lost revenue when an unforeseen event like a fire takes place,” says Verpoort.
“Most businesses have coverage for the fire resulting in shutdown, but not what is called business interruption insurance for the loss of sales and income during the period of the shut down.”
Verpoort says another common mistake is not updating policies or taking changed circumstances into account.
“The risk is that can leave an active policy null and void. Businesses are also not doing enough to take action themselves to reduce premiums. For example, simply installing an alarm system or developing a workplace safety policy to reduce occupational injuries and hazards can help bring premiums down,” says Verpoort.
He advises that businesses need to improve their understanding of what is excluded from policies too. “We find many business owners are not addressing these risks at executive level on a formalised basis and leaving it to operational managers to take care of,” says Verpoort.
He contends that the use of a commercial insurance broker could be a step in the right direction to identifying and plugging coverage gaps.
“It is critical that brokers understand the needs of a business and walk the risk. They can only tailor the best solutions if the risk is clearly understood. Too often, only lip service is paid to this area, leaving little understanding of the cost implications and evolving operational and trading risks,” says Verpoort.
“For example, having a high deductible (or excess) that simply reduces premiums may not make business sense, for example. A deductible is the amount of expenses you pay out of your pocket before the insurer pays and insurance premiums are typically cheaper when they have high deductibles.
“Businesses often look to increase these where they can, as it can bring down the pay-away cost of insurance as an operating expense. But this needs to be balanced against affordability and the cost benefit achieved in doing so,” says Verpoort.
Standard Bank has seen an increase in potential claims for damages caused by load shedding over the past few months – but this is often based on an inaccurate understanding of the coverage being provided.
Verpoort says as a general rule it is not covered as it will depend on which policy has been taken out and the reason for the power failure.
Business interruption insurance includes perilous events like wind, snow, fire, or an explosion as the underlying cause.
“The reality is in 90 percent of cases the policy won’t respond to load shedding damage. Businesses should be careful in rushing out to buy business interruption insurance on the expectation that consequential revenue loss would be covered. In most instances this loss would not be covered,” informs Verpoort.