Ombud report reveals worrying trend in car insurance

LAST week I focused on people defrauding their insurance companies by various means. Today I turn to questionable and unfair practices by insurance companies, as revealed in the annual report for 2021 of the Ombudsman for Short-Term Insurance (Osti), which was released this week, together with the annual report of the Ombudsman for Long-Term Insurance.

The report highlights a worrying trend in car insurance: an increasing pressure on you, the policyholder, to prevent loss or damage to your car by taking “reasonable precautions”.

Comprehensive vehicle cover is designed to compensate you financially for, among other things, damage to your car as a result of an accident, whether you were at fault or not. “Fault” in this context refers to your negligence: you misjudged the distance between your car and the one in front of you and failed to stop in time; or you failed to check your rearview mirror when changing lanes, resulting in a side-on collision. In such cases, while you would probably lose your excess, the bulk of the claim would be settled.

What was never covered was loss as a result of you driving recklessly or driving while under the influence of alcohol or drugs.

But the line between negligence and recklessness is becoming increasingly blurred, and it appears that insurers are rejecting more and more accident claims on the grounds that the policyholder could have done more to prevent the accident. Osti chief executive Edite Teixeira-McKinnon

notes in the report: “The annual reports in 2019 and 2020 pointed to an upward trend in the number of complaints relating to accident claims rejected by insurers on the ground that the incident driver failed to exercise reasonable precautions/due care. The reasonable precautions/due care clause is a general condition of cover applicable to all categories of insurance. However, the upward trend in claim rejections based on this ground has not been seen in other categories.

“The number of these complaints increased substantially, by 48%, in 2019 and 2020. In 2021 the Osti considered 26% more complaints of this nature when compared to 2020. Many of these claims were rejected based on allegations that the driver was speeding.”

In 2021, of 369 such complaints, 47 were decided in favour of the complainant and insurers paid up. Rejected claims were overturned, for instance, where an insurer relied on an inaccurate or incomplete report from an accident reconstruction specialist.

“The office does not simply accept an expert report as decisive,” Teixeira-McKinnon says.

“The Osti carefully evaluates this evidence and determines to what extent the findings and conclusions put forward by the expert were established on logical and accurate reasoning.

“Even when an insurer has satisfied the office that the driver was speeding, a rejection of the claim may be overturned because it failed to establish the legal requirement to prove that the driver acted recklessly. Essentially, this requires proof that the driver knowingly courted danger, with reckless abandon and in disregard of the reasonable possibility of the loss eventuating, and then failed to take reasonable steps to prevent it. A claim cannot be invalidated by the insurer if it, at best, established that the driver drove negligently.”

Case study

In the following case the Osti issued a formal ruling against the insurer, Old Mutual Insure.

The complainant, Mr A, approached the Osti after his accident claim had been rejected on the grounds that he had exceeded local speed limits and had failed to exercise due care and caution.

Mr A had been driving at about 80km/h when he saw three cows in the road and had to take evasive action, resulting in the accident. The speed limit on the relevant section of the road was 60km/h.

Relying on an expert report, Old Mutual Insure submitted that Mr A had attempted to execute a righthand turn at excessive speed and that this and the bad road surface caused the accident. The insurer said such a manoeuvre was reckless and grossly negligent. It submitted further that Mr A had “reconciled himself with the fact that he might be unable to take evasive action should an emergency occur”.

Mr A’s version was that, when he saw the cows, he thought he would be able to safely pass them.

After passing the first cow, the second one jumped into his path, and he then had to take evasive action.

Senior Assistant Ombudsman Peter Nkhuna, says in his case report that the Osti found that the insurer, and its expert, had failed to prove that their version, rather than that of Mr A – that he was avoiding a cow – was the more probable one.

The Osti noted various other shortcomings in the insurer’s expert report, including:

The insurer’s arguments were based on the premise that Mr A had executed a right-hand turn, even though this had not been established.

The expert questioned the driver’s reaction in avoiding the collision with the cow, advising that ”it had not been the best reaction”.

The insurer’s evidence did not adequately deal with the issue of the presence of the cows and what impact this would have had on the driver. For example, it did not deal with the distance from which Mr A would have seen the cows and how much time he had to react.

“Interestingly’” says Nkhuna, “it was acknowledged that the vehicle’s movement did suggest that it was avoiding something.”

Nkhuna says Old Mutual Insure had failed to prove that there was a causal link between the speed at which the insured vehicle was travelling and the collision. On the alternative argument that Mr A had failed to exercise due care and caution, the insurer’s case was “found wanting in that it had not demonstrated fault in the sense of the subjective dolus eventualis” (the perpetrator actively foresaw the results of his actions).

The Osti recommended that Old Mutual Insure settle the claim, but the insurer demurred.

A provisional ruling was then made in favour of Mr A, which the insurer again disputed.

The provisional ruling was then made final, whereupon Old Mutual Insure accepted the decision and settled the claim.