The quarterly newsletter of the Ombud for Short-term Insurance (OSTI) Issue 1 of 2021 contains case studies related to claims which arose as a result of the COVID-19 pandemic and provides insight to how the OSTI dealt with this.
These case studies highlight some of the practical issues that impacted short-term claims as a result of the country’s lockdown and are intended to provide guidance and understanding of the way in which OSTI resolves complaints, applying customer fairness principles to ensure fair and equitable solutions between Insurer’s and their clients. Below, we take a closer look at two case studies.
Case study 1: Motor vehicle claim during lockdown
In this case study, the client lodged a motor vehicle claim to the insurer which was later rejected on the grounds that the client contravened the lockdown regulations which were issued in terms of the Disaster Management Act.
The OSTI requested the insurer to provide the relevant policy provision that was relied on to justify the rejection of the claim and stated that where such policy provision was not material to the loss, the insurer should consider settling the claim.
The insurer referred to a clause from its policy schedule which allowed it to repudiate a claim where the insured breaks the law namely: “If you or the driver driving your car does not have a valid driver’s licence, or if you break the law”.
The case sets out that a motor vehicle accident occurred during Alert level 4 of the lockdown. The client was in the process of relocating from one residence to another and was travelling between these residences to cast an eye on them during Alert levels 4 and 5. During this time, under lockdown levels 4 and 5, persons had to remain home and were only allowed to travel under certain circumstances. The Insurer argued that the client was not performing an essential service and the relaxation on the restriction between the lockdown levels did not apply to the client’s movement between his households. The insurer contended that the client had permission to travel between his residence and place of work only, as he had a work permit, and not between his residences and was therefore in contravention of the regulations.
Further, if the client adhered to the regulations, the accident would not have happened as he would not have been travelling on that route at all and as a result increased the insurer’s risk.
The OSTI advised the insurer that its response did not address the materiality of the policy exclusion to the loss itself. The insurer did not prove that the accident was caused by the insured breaking the law. The OSTI further considered the matter from an equity perspective and found that there was no causal link between the breach of law and the accident. The OSTI recommended that the insurer settle the claim.
Case Study 2: Failure to Update Residential Address
This case sets out that a client’s car was stolen while she was staying with her family in Brakpan, Gauteng. The insurer rejected the claim as the client was from Bloemfontein and failed to update her residential address to Brakpan, Gauteng with the insurer.
Dissatisfied with the rejection of the claim, the client approached the insurer’s internal dispute officer and was informed that the initial decision was overturned, and the claim would be settled on a proportional basis by deducting the percentage of the premium that would have been paid to the insurer if the client had updated the address on the policy. The deduction amounted to 29.12% from her claim because she was based in Brakpan and not Bloemfontein for two months. The insurer would therefore only pay 70.88% of the claim, stating that it only received 70.88% of the correct premium.
The client was not happy with this decision as she was initially visiting family in Brakpan on a temporary basis and had no choice but to remain in Brakpan due to the COVID-19 lockdown. OSTI noted that the client therefore did not permanently move to Gauteng and the vehicle was at the new risk address for only one month before it got stolen.
Accordingly, a proportional settlement was inappropriate. The OSTI requested the insurer to settle the claim by deducting the actual difference in the premium for the month that the vehicle was at the new risk address. The insurer followed the OSTI’s recommendation and settled the claim accordingly.
Advisors are encouraged to always go through the policy document with their clients to highlight specific policy exclusions and important conditions. Although in these case studies, the OSTI found in favour of the insured, there have been many instances where the insured was held liable for not fully abiding by the terms of the policy. Advisors are reminded to alert their clients to any obligations that the client should comply with the conditions of cover, such as disclosing any permanent change to the risk address.
To read more on the case studies, consumer tips and announcements from the OSTI, click here to read the newsletter.