The 2019 Annual Report of the Ombudsman for Short-term Insurance (OSTI) released end May 2020 shows that the Ombud received 10 367 formal complaints for the 2019 period which was an increase from 9 779 complaints in the previous year, 2018. The OSTI closed 9 167 complaints in 2019 while 9 474 complaints were closed in 2018.
A closer look at the 9 167 complaints that were closed shows that the majority of these complaints were in respect of motor vehicle claims at 49% followed by homeowners/building claims at 20%, commercial claims at 8% and household content claims at 6%, with the balance of 17% of complaints being non-claim related or related to other types of cover.
Analysis of the claims
Motor Vehicle Claims
A deeper analysis of Motor Vehicle claims reveals that 73% of these complaints were for accidental damage. Warranty and mechanical breakdown claims comprised 8%. Theft and hijack claims also comprised 8%. This trend remains consistent with previous years. The Report stated that the primary cause for motor vehicle complaints related to claims settlement calculations while the secondary cause for these complaints was rejections based on the insured’s alleged non-disclosure or misrepresentation of underwriting details at the sales stage.
Homeowners insurance claims
54% of complaints considered by the OSTI under homeowner’s insurance related to claims for damage caused by acts of nature, largely storm related. The primary cause for complaints, at 30%, was the rejection of claims on wear and tear, gradual deterioration and lack of building maintenance being the proximate cause of the damage. The secondary cause for complaints related to rejections based on no insured event having operated.
Household content insurance claims
Theft and burglary claims amounted to 67% of complaints considered by OSTI under this category. Claims settlement calculations remain the primary cause for complaints, as in the previous year. The disputes mainly related to issues of underinsurance, replacement values and proof of ownership in respect of the claimed items. The secondary cause for complaints was rejections where the insurer’s underwriting criteria for the insured event were not met. Examples include minimum security requirements, such as a burglar alarm with armed response, burglar bars, and burglar gates not being complied with by the insured.
Commercial insurance claims
The majority of commercial complaints considered by OSTI related to motor vehicle (32%) and building (23%) claims. The primary cause for the complaints was rejections based on gradual deterioration, wear, and tear and lack of maintenance. The secondary cause for complaints was the claims settlement calculations followed by rejections on the ground that the insurer’s specific conditions of cover were not met, such as a valid professional driver’s license, a vehicle’s roadworthiness, alarm warranties and fire safety measures.
‘Other’ & non-claim related policy complaints
The remaining complaints relate to various insurance products – including personal accident, water loss, travel insurance, all risks, mobile device cover, legal expenses, hospital, and medical gap cover. The OSTI states that the general policy-related disputes include policy amendments/endorsements, policy cancellations/lapses, premium increases/rebates, and service-related complaints. The office of the OSTI found that the primary cause for complaints under this category is the quality of the communications that take place between the insurer and the insured during underwriting and over the operation of the policy
We recommend that FSPs who deal in short-term insurance products take time to read the Ombud’s full report. This can be used as the basis to review the advice process followed, bringing client’s attention to important information in policy documents, and ensure compliance with insurers’ conditions of cover.