The latest Ombudsman for Short Term Insurance (OSTI) Annual Report makes interesting reading from a consumer perspective, especially the insights it provides on the most common reasons for claims being rejected.
The report confirms that motor, home and household policies remain the Achilles heel of the South African insurance industry from a customer perspective. These are the three areas in which customers continue to make common disclosure and behavioural mistakes. They are also the areas where the most confusion exists concerning the, level of cover provided by insurance policies as well as the circumstances required for claims to be accepted.
The seven most common reasons why insurance claims are repudiated:
Failing to insure household contents at their current and correct replacement value. Most people simply renew their home contents insurance policies every year without updating their level of cover even when they have bought new things or replaced older items.
2. Poor maintenance
Insurance policies only cover damage caused by unforeseen events. Home maintenance is the responsibility of the homeowner. Homeowners who don’t maintain their homes adequately are at greater risk of having their claims rejected.
3. Alarms not working
Homeowners should ensure that alarms work at all times. It is the policyholder’s responsibility to keep the security system operational. Should theft result from a faulty alarm, claims are likely to be rejected. Since this includes flat alarm batteries, in an age of load shedding policy holders should also ensure their alarms are backed up with independent battery or other power sources.
4. Driving violations
A motorist driving under the influence of alcohol or narcotics or without a valid driver’s licence is committing a criminal offence. Criminal acts automatically invalidate insurance cover. This includes reckless or negligent driving as well as speeding, especially if these can be shown to have been the cause of the damage or loss.
5. Unroadworthy vehicles
Broken windscreens or wipers or tyre treads below the legal limit of 1.6mm are common drivers of accidents and claims repudiation. Should it emerge that any aspect of the vehicle was not in working condition and contributed to the cause of accident, the insurance claim can be rejected on the basis of the vehicle not being roadworthy.
6. Safe overnight parking
Insurers have different requirements in term of what constitutes secure overnight parking. Off-street parking is acceptable to some, while others may insist that the vehicle be kept behind an automatic garage door, or even a locked door. Vehicle owners must ensure that the security requirements stipulated by their insurance policy are adhered to. Should motorists park their vehicles in unsecured driveways or on the street it is important to inform insurers in order to confirm they are indeed still covered for loss or theft and, if not, adjust their premiums accordingly.
7. Unnamed drivers are generally not covered
If a motor insurance policy provides cover for named drivers, claims will be rejected if another, unnamed, driver was behind the wheel at the time of the accident. If multiple people are to drive a vehicle, the insurer should be informed upfront and as much information as possible supplied. Another common mistake is parents listing themselves as the regular drivers of their children’s vehicles in order the secure a lower premium. When it is found out – usually in an accident – that the parents were not the regular drivers of the vehicle the claim will in all likelihood be rejected.
The bottom line is consumers can never give too much information to their insurer or broker. Describe your home, vehicle and personal circumstances in detail so that insurers and brokers get an accurate view of your real exposure – and cover it appropriately.