The Ombud for Short-term Insurance (OSTI) recently published its quarterly newsletter: The Ombudsman’s Briefcase. This Issue 2 of 2019 announces the new appointment of Latoya Masango as Assistant Ombudsman. The issue also contains excerpts from the 2018 Annual Report, information on the Annual Report launch where Senior Assistant Ombudsman, Ayanda Mazwi, presented the statistical analysis of formal complaints received by the OSTI, a few case studies and consumer tips.
Statistical data for 2018 highlights
Some of the highlights of the statistical data for 2018 include the average turnaround time for the resolution of complaints which was 104 days as well as the highest categories of complaints dealt with by the OSTI as at 31 December 2018, these were:
- Motor vehicle insurance at 48% of the total number of finalised complaints.
- Homeowners insurance at 21%
- Complaints relating to commercial insurance at 9%
- Household content insurance complaints at 5%
Case Study – Misrepresentation / Non-disclosure
The case studies in this issue focus on retail value, circumstantial evidence, misrepresentation or non-disclosure, and wear and tear. The case studies are intended to provide guidance and insight into the way the OSTI deals with complaints.
We take a closer look at the misrepresentation / non-disclosure case study. In this case the claim was rejected by the insurer on the grounds that Mr. T had failed to take steps to prevent the loss by a lack of due care and failed to disclose a change in risk address.
Briefly the case sets out the circumstances of Mr. T who parked his motorcycle outside his cousin’s premises and the motorcycle was subsequently stolen. It was found that Mr. T had actually parked the motorcycle at his cousin’s premises for the past two months and had failed to notify the insurer of the change in risk address. It was alleged that the motorcycle had been kept on the premises whilst undergoing repairs but was parked outside the premises on the day it was stolen as the repairs had been completed. Further it was alleged that Mr. T did not secure the motorcycle or take any steps to prevent the loss.
The OSTI requested the insurer to address the materiality of the alleged change of risk address to the loss and how it would have underwritten the risk if it had been advised that Mr. T would be keeping the motorcycle at his cousin’s premises for two months whilst undergoing repairs. The insurer could not prove that the change in risk address was material to the loss and had not demonstrated any prejudice suffered as a result of the alleged change in risk address. Insofar as the policy related to overnight parking being in a “locked garage or behind locked gates” the policy provisions were still adhered to as the motorcycle had been kept behind locked gates whilst it was at Mr. T’s cousin’s premises. Further, the insurer failed to prove that it could be reasonably inferred that the actions of Mr. T were reckless by not securing the motorcycle with a chain or to a fixed object as this was not a requirement of the policy.
The OSTI therefore disagreed with the insurer’s decision to reject the claim based on a lack of due care and on the grounds of a change in risk address. Accordingly, the claim was settled.
Advisors must impress upon their clients the importance of transparency and making full disclosures. This should be considered not just at the inception stage of a policy but whenever there are any changes in circumstances. Full disclosure can prevent the possibility of a claim being rejected based on misrepresentation or non-disclosure and causing undue delay with the finalisation of a claim.