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OSTI Launch of Annual Report for 2008 (2009)

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The Ombudsman for Short-Term Insurance launched its Annual Report for 2008 and announced the winner of its prestigious Isabel Jones Ukusizana Award at a function held in Johannesburg today (Wednesday 25 March 2008).

The period under review saw many milestones being achieved, most noticeably the recovery of monies for consumers, namely R113 million. This is the highest ever recorded in any one year and represents a 28 % increase over the recoveries made in the previous year, which the Ombudsman for Short-Term Insurance, Brian Martin, attributes to factors such as the introduction of the principle of proportionality in settlements, stricter enforcement of the provisions of the Policyholder Protection Rules (PPR), an increase in the volume of complaints received and the higher quantum involved per complaint as a result of inflationary inputs. In addition the number of complaints received by the Office increased by 7.48 %. Of concern to the Ombudsman was the decline in the average turn-around time to finalise complaints by the Office which was the result of losing professional staff, time needed for new staff to settle into their new roles and the increase in number of complaints being received.

The Ombudsman made only one ruling during the year compared to the seven made last year. "This is pleasing indeed and reflects, to a large extent, the better understanding which exists as to the approach adopted by the Office to many common problems", says Ombudsman, Brian Martin. "However differences of opinion continue to exist with some insurers relating to issues such as professional driving permits and the compliance with statutory obligations for cover to exist in terms of insurance policies." The Ombudsman highlighted the Office's concern in the number of complaints received arising out of the rejection of claims for theft and burglary. Many consumers are often unaware of the policy's obligations or the consequences of non-compliance. "We urge consumers to make sure that they read and understand the conditions of the policy contract before they agree to the terms", says Brian.

Some insurers expressed a desire for an appeal mechanism to be put in place against formal rulings made by the Ombudsman. The matter was considered in detail by the Office and a discussion paper was prepared on the subject; however the Board of Directors of the Office felt that the introduction of an appeal mechanism was not warranted and that the status quo should be maintained.

In his Annual Report, the Ombudsman says that consumer education remains one of the biggest challenges facing the insurance industry. The Report also touches on the debate concerning the merits of establishing a single independent Ombudsman Scheme for the Financial Service Industry, the motivation being that consumers can direct their complaints to one source as opposed to several sources, which could be confusing. The Ombudsman believes that the issue of easy access to the Ombudsman Scheme should not be confused with their effectiveness and advises that voluntary schemes (such as the Ombudsman's Office) have unique advantages in terms of flexibility, informality and effectiveness through negotiation and mediation which are not always possible through a statutory framework. In addition, voluntary schemes are able to offer unique cost benefit advantages. In terms of international benchmarking, a unit cost is defined as the cases finalised in a year divided into the expenses for the year. In 2008, the Ombudsman's unit cost was R1300 per case. This compares very favourably with local and international Ombudsmen.

During the year the Office also increased the jurisdictional limits for commercial disputes, the turn over restriction on a policy holder has been retained but has been increased to R10 million and the amount per claim has been increased to R1 million.

At the launch of its Annual Report, the Ombudsman announced the winner and runner ups of its prestigious Isabel Jones Ukusizana Award. The award is an annual award, which recognises the significant contribution made by the insurance industry to the functioning of the Office and to promote consumer confidence in the industry. Three finalists were selected for their commitment to the effective resolution of complaints and their application of the principles of equity. The winner of the Isabel Jones Ukusizana Award for 2008 was MUA Insurance Company Limited, with RMB Structured Insurance Company in second place and OUTsurance in third place. "Competition for this award has been intense with several insurers being in contention for the award. This year, our Office implemented a system to evaluate an insurer's response to each complaint received for the purpose of calculating the winner on a more scientific basis. Our winners must be congratulated on their outstanding achievement," says Brian.

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