The Uninsured and the “Not-so-Insured”

Peter Nkhuna

Senior Assistant Ombudsman

The generally accepted statistic is that only 30 to 35% of motor vehicles on South African roads are insured. This statistic is simply based on recorded data. It is my contention, however, that in reality a greater proportion of vehicles considered insured may not in fact be insured.

The generally accepted statistic is that only 30 to 35% of motor vehicles on South African roads are insured.

This statistic is simply based on recorded data. It is my contention, however, that in reality a greater proportion of vehicles considered insured may not in fact be insured. My submission is admittedly based on what some may call “anecdotal evidence” from complaints received by our office. The ratio of complaints received by OSTI to the total claims submitted to insurers is only 0.24% for 2019, so perhaps it is indeed only anecdotal.

Part of the reason for this view is that some consumers of insurance products do not comply with the terms and conditions of their policies. This may be either as a result of them not being aware of their responsibilities, or, alternatively, simply ignoring such responsibilities. We often find that insureds are of the mistaken belief that, by simply paying premiums, they are entitled to have all their claims settled by their insurers. On the contrary, the ombudsman‘s finding in the matter discussed below demonstrates how important it is that insureds honour their own obligations.

Part of the reason for this view is that some consumers of insurance products do not comply with the terms and conditions of their policies.
highway, drive, driving
tools, spanner, mechanic

Most motor policies impose the following responsibilities which are sometimes ignored or not met:

  1. The duty to make accurate disclosures at all times;
  2. The duty to allow only licensed drivers to drive the insured vehicle;
  3. The duty not to drive the insured vehicle whilst the driver is under the influence of alcohol;
  4. The duty not to drive the insured vehicle recklessly;
  5. The duty not to use an un-roadworthy vehicle on public roads; and
  6. The duty to maintain the insured vehicle and keep it in a good state of repair.

The effect of ignoring or not meeting any of the above responsibilities is that, when an insured claims, the insurer may be entitled to decline liability.

We often find that insureds are of the mistaken belief that, by simply paying premiums, they are entitled to have all their claims settled by their insurers.
During the assessment of the claim, the insurer found that the vehicle had been poorly maintained.

In other words, while the vehicle would at face value be insured, in reality, and as a result of the insured not complying with the obligations set out in the policy terms and conditions, the vehicle is not covered. The insured would be operating on the premise that the vehicle is insured while his/her own conduct would lead him/her to being exposed to, at least, some of the risks that may materialise.

In one of the cases OSTI recently dealt with, the policy required that the insured keep his vehicle in a good state of repair. However, for whatever reason, the insured did not do this.

On a particular day, while the insured was driving his vehicle, he noticed that the vehicle was on fire. He, together with members of the community in the area, tried to douse the fire. There appeared to the insured to be no specific reason why the fire ignited. The insured subsequently registered a claim with the insurer.

During the assessment of the claim, the insurer found that the vehicle had been poorly maintained. It further found that the fire incident was as a result of the vehicle not having being properly maintained.

The assessor appointed by the insurer to determine the cause of the fire made the following findings:

  1. There were no signs of fire damage to the vehicle except for fire damage in the engine compartment;
  2. The fire damage appeared to emanate from inside the engine;
  3. There was evidence that the engine had overheated as a result of a cracked and broken plastic breather pipe of the positive crankcase ventilation system;
  4. There was also evidence of one of the coolant hoses having been fitted by tying it with a piece of wire instead of a circlip/clamp normally used for such fitments, and the seal on the end of the rubber pipe was damaged;
  5. In addition, there was further evidence of advanced wear and tear, including oil leaking through the turbocharger’s oil seals; and
  6. It was the assessor’s view that the fire was the direct result of the poor condition of the vehicle and that, if the vehicle had been properly maintained, the fire would not have occurred.
It was the assessor’s view that the fire was the direct result of the poor condition of the vehicle and that, if the vehicle had been properly maintained, the fire would not have occurred.

On the basis of the assessor’s findings, the insurer declined liability for the claim and relied on the policy wording which stated that the insurer was not liable for “failure, breakage or rust, wear and tear, depreciation, perishing, fading, mechanical or electrical breakdown”.

Being unhappy with the outcome of the claim, the insured lodged a complaint with our office.

It was the ombudsman’s finding that the insurer’s stance on the claim could not be faulted.

It is clear from the above example that, while this vehicle and the insured would have formed part of the statistics of the insured population, based on the condition of the vehicle, it was not, in fact, as comprehensively insured. In terms of the policy, there was no cover for any losses relating to accidents, fire or the other related perils where the condition of the vehicle was material to the loss.

laptop, office, hand
It was the ombudsman’s finding that the insurer’s stance on the claim could not be faulted.

In the case discussed above the insured had failed to keep his end of the bargain, whilst, at the same time, expecting his insurer to honour the claim. In this case, had the insured maintained his vehicle, as required in terms of the policy, there would have been no loss or damage and therefore no claim.

It is conceivable that the insured’s conduct could result in all of the benefits under an insurance policy becoming nullified, and not only some of them.

Insurance consumers are therefore encouraged to familiarise themselves with their policy terms and conditions and to conduct themselves accordingly, otherwise, they may find themselves unable to enjoy the benefits of their policies.

Insurance consumers are therefore encouraged to familiarise themselves with their policy terms and conditions and to conduct themselves accordingly, otherwise, they may find themselves unable to enjoy the benefits of their policies.

Peter Nkhuna

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