A Statistical Analysis of Matters Closed by OSTI in 2019

Ayanda Mazwi

Senior Assistant Ombudsman

During 2019, OSTI finalised a total of
0
formal complaints
Motor vehicle claims at

49%

Followed by homeowners / building claims at

20%

Commercial claims at

8%

Household content claims at

6%

With the balance
– non-claim related or related to other types of cover –  
at

17%

So what, concerning these categories, did people complain about the most?
keys, hands, house

Motor Vehicle Claims

The majority of these complaints, at 73%, 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. OSTI considered 4 492 motor vehicle claim disputes in 2019. The primary cause for complaints related to claims settlement calculations. The type of disputes falling under this category vary.

Our office wishes however to highlight that the predominance of these disputes related to vehicle credit shortfall and uninsured accessories. Standard comprehensive motor vehicle insurance will not necessarily cover the total amount owed to the bank in respect of a financed vehicle. Vehicle credit shortfall is the gap between the vehicle’s insured value (covered under comprehensive motor vehicle insurance) and the amount owing to the finance house.

Should a vehicle be stolen or written off in an accident, the vehicle’s credit shortfall can be crippling as the consumer is left owing money on a motor vehicle that he/she no longer has. Consumers must, therefore, ensure that their policies include cover for the credit shortfall and any financed accessories which have been added to the insured motor vehicle.

These cover options are in most cases offered at an additional premium and administered under their own terms, conditions and exclusions.

Vehicle credit shortfall is the gap between the vehicle’s insured value (covered under comprehensive motor vehicle insurance) and the amount owing to the finance house.
In 2018, OSTI saw a 22% decrease in the number of these complaints when compared to the previous year. In 2019, there was a further 20% decrease.

The secondary cause for complaints was rejections based on the insured’s alleged non-disclosure or misrepresentation of underwriting details at the sales stage.

In 2018, OSTI saw a 22% decrease in the number of these complaints when compared to the previous year. In 2019, there was a further 20% decrease.

OSTI always highlights in its engagements with consumers and the public at large, the importance of providing truthful and accurate information to the insurer during the underwriting of the policy, as well as the insurer’s obligation to conduct the sales process by agreed industry codes of practice and the Policyholder Protection Rules.

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238 complaints relating to rejections on the ground that the insured was driving under the influence of alcohol (DUI) were considered by OSTI in 2019. In 2018, we recorded a 15% decrease when compared to the previous year. The statistics in 2019 indicate a further 13% decrease. This is encouraging as it displays an improvement in consumer responsible conduct, such as using e-hailing services, and the positive influence of measures taken by insurers in this area, such as providing their customers with chauffeured services.

OSTI has always cautioned consumers that a DUI rejection may be justified on circumstantial evidence alone, despite the driver not having been tested for alcohol by way of a breathalyser or blood test, or having been convicted of a criminal offence concerning the incident. In previous years, some insurers relied on insufficient circumstantial evidence to justify these rejections, in which case OSTI would overturn the insurers’ decisions. Perhaps these statistics also indicate that insurers are validating DUI claims in a fairer manner.

In 2019, 19% of motor vehicle claim disputes were resolved in favour of the insured’s claim,
and OSTI put R47 701 385,68 back into the pockets of the insured.

Homeowners Insurance Claims

54% of complaints considered by OSTI under homeowner’s insurance related to claims for damage caused by acts of nature, largely storm-related. This figure dropped from 58% recorded in 2018.

OSTI considered 1 843 homeowners’ insurance claim disputes. 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. While this cause for complaint declined by 18% when compared to 2018, this rejection reason continues to be the main basis for consumer dissatisfaction in homeowner’s insurance coverage.

If the damage claimed is attributed to the poor condition of the property, the policy may not respond – even if an insured event did occur. In general, OSTI bases its assessment of these matters on the information contained in expert reports and photographs submitted by the parties. The evidentiary burden of proof lies with the insurer if it rejects the claim on an exclusion and the insurer must establish a causal connection between the condition of the property and the damage.

The secondary cause for complaints related to rejections based on no insured event having operated. The insurer is only liable if the claim made falls within the scope of cover provided, in other words, if an insured event as stated in the policy terms and conditions is proven by the insured as being the cause of the damage. Here, the burden of proof is on the insured, who must provide evidence and demonstrate that the effective cause of the loss is an insured event.

15% of homeowner’s insurance disputes were resolved in favour of the insureds’ complaint, with a recovery of R14 653 628,32.

54% of complaints considered by OSTI under homeowner’s insurance related to claims for damage caused by acts of nature, largely storm-related. This figure dropped from 58% recorded in 2018.

Household Content Insurance Claims

Theft and burglary claims comprised 67% of complaints considered by OSTI under this category, a 4% decline compared to last year’s figure.

Claims settlement calculations remain the primary cause for complaints, as in the previous year. The disputes related mainly to issues of under-insurance, 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. Consumers are advised to review their policy documents and ensure compliance with their insurers’ conditions of cover.

This category, overall, comprised 17% of the formal complaints considered by OSTI in 2019. Consumers are advised to review their policy documents and ensure compliance with their insurers’ conditions of cover.

Complaints relating to damage caused by power surge increased from 3% in 2018 to 6% in 2019.

This may be attributed to load-shedding and power failures experienced in the year. Damage caused by power surge is excluded in some household content insurance policies. Consumers must read through their policy terms and conditions and consult with their insurers or brokers to ensure that there is cover in place to repair or replace their valuables in this event.

18% of household content insurance disputes were resolved in favour of the insureds’ complaint, with a recovery of R2 958 039,99.

Commercial Insurance Claims

The majority of commercial complaints considered by OSTI related to motor vehicle (32%) and building (23%) claims. OSTI considered 723 commercial complaints in 2019. Overall, 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 road-worthiness, alarm warranties and fire safety measures.

18% of commercial insurance disputes were resolved in favour of the insureds’ complaint, and OSTI recovered R18 255 299,01.

‘Other’ and 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. General policy-related disputes include policy amendments/endorsements, policy cancellations/lapses, premium increases/rebates, and service-related complaints. We often find 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.

This category, overall, comprised 17% of the formal complaints considered by OSTI in 2019. 34% of these disputes were resolved in favour of the insureds’ complaint. Overall, OSTI recovered R11 366 537,68 for insureds in this category of complaints.

OSTI’s Customer Experience

In 2018, OSTI reported that 60% of complainants who completed our customer experience surveys indicated that they were satisfied with our service, processes, and communications.

In January 2019, OSTI adopted, as part of its commitment to developing a better understanding of its relationship with customers, a stronger customer-centric approach. We introduced insurer surveys in the evaluation of OSTI’s overall delivery of service and quality outcomes.

In relation to the number of complaints finalised in 2019, 22% of complainants and 25% of insurers completed surveys. Out of these, 75% were satisfied with our service, processes, and communications.

Customer experience, in the context of OSTI, entails, at its core, delivering high quality and efficient complaint resolutions and customer experience therefore remains an integral part of our business strategy.

Ayanda Mazwi

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