The quarterly newsletter of the Ombud for Short-term Insurance (OSTI) Issue 4 of 2020 contains news and events, case studies, consumer tips, and an article on the OSTI’s complaints handling process. The case studies published in this issue focus on time-barred complaints, conditions for cover, and fraudulent claims. The case studies are intended to provide guidance and insight into the way the OSTI deals with complaints. There are some important lessons that advisors can take from these cases to avoid similar issues arising when a client has a claim. We take a closer look at the case studies which focus on the time-barring provision and the requirements for cover.
Case Study 1: Time-barring provision
In this case study, the client lodged a claim with her insurer for lightning damage to her household items on 14 November 2016. The client was informed of the rejection of her claim on 17 November 2016 on the grounds that the damage was not caused by an insured peril and that the loss did not fall within the benefits provided by the policy. The client escalated the issue internally with the insurer however, on 16 August 2017, the client was informed of the outcome of the escalation of the dispute which was not in her favour. The insurer decided to stand by its initial decision to reject the claim.
The case study sets out that the client only approached the OSTI on 10 September 2019, more than two years after the outcome of the internal dispute with the insurer was communicated to her. The OSTI sent the complaint to the insurer, where the insurer responded in that the client’s complaint was time-barred and should not be entertained as the client did not approach the OSTI within the time frame prescribed by the policy.
According to the terms and conditions set out in the policy, the client had 90 days from the date on which the insurer rejected the claim to make representations to the insurer. Once the outcome of the dispute was communicated to the client and the decision was not to indemnify the client, the client had a further 6 months after the expiry date of the initial 90 days to challenge the decision. The insurer submitted that the timeframe was set out not only in the policy terms and conditions but also in the rejection letter sent to the client.
The OSTI has limited jurisdiction concerning time-barred complaints, however, clause 4 of the OSTI’s Terms of Reference grants the OSTI the power to condone non-compliance with a time-bar provision in an insurance policy if the client can provide good cause for the late filing of the application for assistance. The OSTI requested the client to provide reasons for the late submission of the complaint, to which she failed to respond. The client therefore failed to show good cause for the non-compliance with the time-bar provision. As a result, the OSTI could not condone the late filing of the complaint and it therefore fell outside of the OSTI’S jurisdiction and could not be considered. No decision could be made about the merits of the client’s complaint.
Case Study 2: Exclusions and Reinstatement provisions
This case study is about a client that had a motor vehicle policy in place since June 2017 however, in February 2019 the client reversed the debit order on his premium as the insured vehicle had been sold and he purchased a new vehicle. The insurer advised that the new vehicle would only be covered from the following month once the insurer receives payment of the outstanding premium and the client sends through photographs of the new vehicle. In April 2019, the client was involved in a motor vehicle accident and subsequently submitted a claim to his insurer.
The insurer rejected the claim on the grounds that the policy was not in force at the time of the accident. The insurer did not receive a premium in February 2019 and the policy therefore lapsed. The insurer had previously informed the client of the requirements to reinstate the policy, however these requirements were not met and thus there was no cover for the vehicle.
The client argued that he was in fact covered as the insurer continued to deduct premiums after the date of the missed premium. The Insurer however argued that the full requirements for the reinstatement of cover were not met as it never received the photographs as requested and was therefore unable to confirm the condition of the vehicle before the accident and successfully validate the claim. In support of its rejection of the claim, the insurer relied on the standard exclusions and the reinstatement provisions of the policy.
The OSTI found that the client was informed of the premium which was not paid and that he was adequately advised of the reinstatement conditions. The insurers rejection of the claim was upheld, as the conditions for cover were not met and therefore there was no policy in force at the time of loss.
Lessons
Both case studies above highlight the importance of adequate disclosure to clients. The Policyholder Protection Rules requires insurers to ensure that policyholders are informed of any time limitation provisions in a policy and the implications of such a provision. Advisors are encouraged to go through the policy document with their clients and ensure that the client is alerted to and understands any special clauses or provisions as well as the implications of these provisions such as the effect of failing to timeously act when there is a time limitation clause or the failure to fulfil all requirements for a reinstatement of cover. It is also important for advisors to keep adequate records of such discussions.