In December 2023, the Short-Term Insurance Ombudsman (OSTI) published the final edition of the 2023 Ombudsman’s Briefcase. During the course of the year, the short-term, long-term and credit Ombudsman will all be merging to form The National Financial Ombud Scheme South Africa (NFO).
This issue of the OSTI’s newsletter contains news and events, four case studies, and consumer tips.
The case studies are intended to provide guidance and insight into the manner in which the OSTI deals with complaints. Below we take a closer look at one case study which focuses on non-compliance with a reporting requirement.
Case Study
Twelve days after the discovery of the theft of a trailer, a logistics company filed a claim with their insurer. The insurer denied this claim, citing the insured’s non-compliance with the claims reporting process.
In the case of a theft or hijacking, the policy obliged the insured to report it immediately to the insurer’s underwriter or private investigator. The insurance policy included the underwriter’s and private investigator’s contact information. The insurer alleged that the logistics company delayed the investigation process and jeopardised any potential recovery of the trailer.
The insured advised that the trailer was fitted with two tracking devices. Both the tracking company and police were immediately notified of the theft. Neither party could recover the trailer. It was the insured’s belief that reporting this to the insurer, or the private investigator would have not yielded any different results from the tracking company and the police. OSTI had to consider if the insured’s delay could have prejudiced the claim and possible recovery of the trailer. In OSTI’s view the investigator had a wider scope and network that could have possibility resulted in the recovery of the trailer had it been timeously reported and hence OSTI supported the insurer’s decision to reject the claim.
Key takeaway
This case does not consider the role and actions of the Advisor but does highlight the severity of the impact for clients who do not adhere to their contractually agreed obligations, including reporting obligations, to ensure cover. In terms of section 7(1)(a) of the General Code of Conduct for Authorised Financial Services Providers and Representatives BN 80 of 2003, an Advisor has an elevated duty to provide a reasonable and appropriate general explanation (not only mere disclosure) of the nature and material terms of the relevant contract or transaction to a client. Advisors are encouraged to go through policy documents with their clients and ensure that the client understands the policy wording and are alerted to any special clauses, provisions, or exclusions. Critically, the Advisor must keep a record of the same, which can be done through an email to confirm the discussion, following a process of initial of important terms and conditions, or a confirmatory note in the record of advice.