Car claims keep ombud busy

The Ombudsman for Short-Term Insurance (OSTI) said in her annual report for 2018 that they recovered more than R87 million for consumers after the office finalised 9 474 cases, which is more or less in line with 2017 when they closed 9 962 complaints and collected just over R87m.

During the year under review, motor vehicle insurance complaints made up 48% of finalised cases, followed by homeowner’s insurance at 21%.

Commercial insurance complaints increased from 8% in 2017 to 9% in 2018 while household content insurance grievances decreased from 6% in 2017 to 5% in 2018. More than two-thirds of finalised complaints related to concerns about an insurer’s decision on a claim, with 36% relating to the rejection of a claim on the basis of an exclusion or warranty in the policy terms and conditions.

The ombud, Deanne Wood, said this indicates that consumers do not know or understand material terms and conditions contained in their policy documents which highlights the need for documents to be drafted in clear and simple language.

On average, disputes in 2018 were resolved in 104 days, an improvement on 2017’s 131-day turnaround and close to the OSTI’s target of 100 days.

However, while speed is important throughout the resolution process, the OSTI is aware that the quality of its interventions are of particular importance.

It is for this reason that the ombud’s primary focus for 2018 was streamlining its complaints resolution mechanism.

This included upgrading IT systems to modernise the complaints process, establishing a new customer experience department, and introducing an internship programme to support graduate lawyers.

Consumers can lodge complaints telephonically or online, so grievances will be assessed faster, ensuring more rapid resolution; insurers will be incentivised to resolve complaints at inception; and a facilitation process comprising negotiation, conciliation and mediation will now be used to resolve more complaints.

Legislative changes to the way financial ombud schemes work, as a result of the Financial Sector Regulations Act of 2017, also promise a more efficient consumer complaint mechanism; particularly with the in-principle agreement to merge the OSTI with the Office of the Long-Term Insurance Ombudsman. The act comes into effect on September 1.

One case that assistant ombud John Theunissen dealt with was accident damage to a vehicle. But it had a twist. Insurance is often regarded as a grudge purchase but if you don’t have it, it could cost you dearly.

“An insurance policy is the financial safety belt airbag for savvy consumers. Without insurance, buyers of high value vehicles would not feel comfortable with the transaction, taking into consideration the risk of driving on South African roads. The devastation experienced by policyholders when a claim is seemingly arbitrarily rejected based on an obscure technical point, is understandable,” Mr Theunissen said.

The insured bought an expensive used vehicle from the manufacturing dealer.

Soon after he collected his car he was involved in an accident which resulted in the total loss of the car.

“The accident occurred as a result of the vehicle’s wheels separating from its chassis. This implied a latent defect and that the damage to the vehicle was as a result of mechanical failure. A particular exclusion applies to damage that results from mechanical failure, which was the proximate cause of the damage,” Mr Theunissen said.

Poximate cause was defined in the case of Pawsey v Scottish Union & National Insurance Company (1908), which said it is a train of events that brings about a result without intervention from anyone or anything – mechanical damage – for example.

In this case, the OSTI agreed that damages resulting from mechanical failure, which was the proximate cause, are excluded from cover.

However, unknown to the insured, the car had been in an accident previously, which resulted in damage. Accident damage is an insured peril in terms of the policy.

The OSTI found that a clear distinction had to be drawn resulting from an accident and damage resulting from mechanical failure.

The damage resulting from mechanical failure was limited to the wheel separating from the chassis.

All damage that occurred before the accident and which may be termed “mechanical failure” would be excluded from cover in terms of the policy wording, which said any damage resulting from the accident was an insured peril and had to be covered.

The insured event must be judged as a novus actus or new cause of damage.

The insurer accepted the OSTI’s recommendation that it settle all accident related damage and exclude damage which resulted from the latent defect/mechanical failure up to the point of the accident.

Or, the insurer was to settle all damages and claim back from the manufacturing dealer.

The insurer decided to settle all accident related damage only.

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