POLICY CHANGES: YOU MUST BE TOLD

An insurer can’t simply change the conditions of your insurance policy without notifying you of the changes and obtaining your consent to those changes.

A case reported recently in the quarterly Briefcase newsletter of the Ombudsman for Short-term Insurance, Dennis Jooste, involved changes in a medical expenses policy that drastically reduced policyholders’ cover.

In March last year, Mr P was involved in a motor vehicle accident in which he fractured his shinbone and broke his foot. He had taken out a medical expenses policy in 2007, which provided cover for expenses incurred as a result of accidental injury, including theatre, ward, pharmacy, X-ray, pathology, physiotherapy and repeat hospitalisation costs up to R100 000 a year.

Mr P submitted a claim to his insurer, Guardrisk, for expenses totalling R63 000. The claim was not settled in full, because, Mr P was told, in May 2012 another insurer had taken over the policy book and had converted the product to a hospital cash-back policy. The new product provided a benefit of only R6 000 per day in hospital. As Mr P had been admitted to hospital for only one day, the payout was just R6 000. Mr P submitted a complaint to the ombudsman, saying he had never been told of the product change.

In responding to the complaint, Guardrisk said that since medical schemes covered the same benefits as those of the medical expenses policy, the benefits were amended in order to avoid double indemnity. According to Guardrisk, the policy amendment was communicated to all affected policyholders in June 2012, and the insurer offered policyholders a 30day notice period should they decide that they no longer required the cover as amended.

Guardrisk failed, however, to furnish the ombudsman with proof that the amendment notice was sent to Mr P and could provide only a template letter, which was neither dated nor addressed to a specified person. Mr P insisted that he had not received Guardrisk’s notice, saying that had he seen the amendment, he might have cancelled the policy.

The Policyholder Protection Rules, to which all insurers must adhere, require the insurer, in the case of a dispute, to present evidence showing that a change in policy terms and conditions was communicated to the policyholder at least 30 days before the amendment came into effect. The insurer must also demonstrate that the policyholder was furnished with an explanation of the principles of the relevant contract and information enabling him to make an informed decision on whether or not to continue with the cover.

In this instance, Jooste said, the insurer materially changed the terms of the contract held by Mr P, thus limiting the cover provided at inception. The changes were never explained or agreed to by Mr P before the amendment came into effect. The ombudsman said it was not sufficient for Guardrisk to submit that the notice of amendment would have been sent to Mr P in the ordinary course of events, without providing the necessary proof.

Mr P’s claim was subsequently settled in full and the amendment notice was sent to him. Note: The ombudsman deals with each case on its own merits and no precedent is created by his findings. The case studies in his newsletter are intended to provide guidance and insight into how he deals with complaints. ◆ Contact the ombudsman on 011 726 8900 or fax 011 726 5501. Email: info@osti.co.za Website: www.osti.co.za