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Please note: This brochure is available in English and Zulu
Tips for the youth to consider when taking out a short-term/non-life insurance policy
In today’s world, young people own some of the most expensive products on the market such as cell phones, cameras, and motor vehicles. In recognition of Youth Month, the Ombudsman for Short-Term Insurance (OSTI) has put together a few insurance tips.
Young people sometimes underestimate the importance of having insurance. The assumption is that nothing will go wrong. The importance of insurance is often only realised when a loss or damage is suffered.
Considering the unpredictability of life events, having the right insurance cover is a significant investment. Short-term/non-life insurance will provide you with financial security against unforeseen damage to or loss of your valuables.
The insurer will ask you a number of questions during the underwriting/sale of the policy. This is done to assess and price your risk. You must answer these questions truthfully. If you fail to do so, the insurer may not only reject a claim but also cancel the policy with effect from the start date. If an insurer cancels your policy, you may find it difficult to obtain other insurance cover.
OSTI sees far too many complaints where young policyholders who have taken out motor vehicle insurance misrepresented the ‘regular driver’. The regular driver is the person who will drive a motor vehicle most often during the period of cover. Drivers between the ages of 18 and 25 sometimes tell an insurer that their parents will be the regular driver so that they can be quoted a cheaper premium.
Insurers conduct detailed investigations when validating a claim. At this stage, such a misrepresentation will invariably be revealed, and the claim may be rejected on the basis of a material misrepresentation.
Before buying insurance, carefully consider your needs, what the insurance product covers, and how much it will cost you.
Choosing the best cover does not necessarily mean finding a policy with the cheapest premium. A cheaper premium may mean fewer benefits and higher excesses. Get insurance that is tailor-made to meet your needs and budget. You must also consistently manage your income and expenses to ensure that the premium is paid on time to prevent the policy from lapsing. This is particularly important as you are still building your insurance risk profile.
Remember that your insurance needs will change as your life and career develop. You should therefore review your insurance policies regularly.
You will not have cover if you reverse an insurance premium after it was successfully collected from your bank account by the insurer. Reversing a premium can even result in the immediate cancellation of the policy. Contact your insurer to see if any arrangements can be made when experiencing financial difficulties.
The insurer does not have an open-ended liability to compensate you for any loss or damage suffered. It is only liable if the claim falls within the scope of the cover provided in the policy documents. Read and understand the policy terms and conditions.
Be mindful of circumstances that may result in an insurer refusing to pay out on a claim, for example driving whilst under the influence of alcohol or without a valid driver’s licence, not adhering to the time periods in the policy, not meeting vehicle or home security requirements, and dishonesty.
Ask your insurer or broker to explain the exclusions of the cover and any obligations you may have under the policy. This will save you the stress and frustration of becoming aware of these only after you have suffered a loss.
For more insurance tips, follow the OSTI social media pages.
Facebook: The Insurance Ombudsman
Twitter: Insurance Ombudsman South Africa
LinkedIn Insurance Ombudsman
ENDS
About the Ombudsman for Short-Term Insurance
The Office of the Ombudsman for Short-Term Insurance (OSTI) is an independent, non-profit industry ombud scheme. Short-term/non-life insurance includes motor, house owners’ (buildings), householders (contents), cell phone, travel, disability and credit protection insurance, and commercial insurance for small businesses and sole proprietors. OSTI’s mandate is to provide the insuring public and the short-term/non-life insurance industry with a free, efficient, and fair dispute resolution mechanism through an alternative dispute resolution process, applying the law and principles of fairness and equity. OSTI is not a court of law. It examines the information and evidence placed before it by the parties to a dispute and makes recommendations that are guided by the legal position and principles of fairness and equity. In rare instances where required, OSTI may make rulings. It does not, nor is it empowered to, procure evidence or witnesses, or investigate a complaint. OSTI, it must be stressed, operates independently of both the Financial Sector Conduct Authority and the Prudential Authority in its adjudication and dispute resolution process.
OSTI urges the public to be entirely truthful with insurance companies
JOHANNESBURG – The Ombudsman for Short-Term Insurance (OSTI) would like to remind consumers not to withhold or misrepresent information when taking out short-term/non-life insurance or when they claim from insurance companies. OSTI points out that non-disclosure or misrepresentation of material facts can lead to a claim being declined or a policy being cancelled or both. A consumer whose policy gets cancelled due to non-disclosure or misrepresentation may struggle to find alternative insurance cover as he/she may either be blacklisted or be considered an undesirable risk.
OSTI recognises that financial hardships may lead to consumers withholding or misrepresenting information. However, OSTI cautions against doing so because the rejection of a claim or cancellation of a policy by an insurer may lead to further financial strain.
When taking out a policy, consumers sometimes misrepresent the details of the regular driver, their insurance history, security requirements, criminal records or the use of their vehicles. The non-disclosure or misrepresentation of this information causes insurers to insure a consumer they would not have insured had they been correctly informed or to charge the incorrect premium.
When a claim is lodged, consumers sometimes provide incorrect or inconsistent versions of the events leading up to or during an incident, inflate their claims or refuse to give their insurers access to information that could affect the outcome of the claim, such as information about their whereabouts or alcohol consumption. Insurers may end up not being able to validate the claim and declining the claim or using other means to get the information.
Consumers often consider it unfair that insurers only validate their information at claims stage. However, it must be remembered that insurance policies are contracts entered into on the basis of good faith. It is the consumer’s duty to provide complete and accurate information which insurers then rely on to underwrite the cover.
Furthermore, consumers should not underestimate the role of independent witnesses, expert evidence, vehicle tracking data, bank statements, cell phone records, medical records, police reports and call recordings, all of which insurers can rely on to validate a claim.
OSTI case study dealing with misrepresentation at sales stage
A policyholder mentioned, during the sale’s conversation, that his son would be the regular driver of the insured motor vehicle and that the vehicle would occasionally be used for business purposes. However, later in the conversation, the policyholder noted himself as the regular driver and insured the vehicle for private use. The consultant informed the policyholder that his son must not drive the vehicle more than him because the policyholder had noted himself as the regular driver.
The insured vehicle was damaged in a motor vehicle accident whilst being driven by the policyholder’s son. The policyholder reported the accident to the insurer and submitted a claim.
During the investigation of the claim, the policyholder and his son informed the insurer’s appointed assessor that the policyholder’s son had been the regular driver of the insured vehicle since the policy started and that he had used the vehicle for business purposes. The assessor also interviewed a colleague of the policyholder’s son. The colleague confirmed that the policyholder’s son drove the vehicle and used it for business daily.
The insurer advised that it would not have accepted the risk had the correct facts been disclosed to it. The insurer therefore cancelled the policy from when it started and rejected the claim.
The policyholder disagreed with the insurer’s decision and argued that the insurer was aware that his son was also going to drive the vehicle for business. He also advised that a previous claim had been reported to the insurer where his son was the incident driver, and no issue was raised by the insurer regarding the regular driver.
The insurer, however, pointed out that the previous claim was not validated nor settled as the cost of repairs fell within the excess payable by the insured. The insurer also acknowledged that it had been informed that the policyholder’s son would drive the vehicle for business, however, the policyholder had indicated that this would only be occasionally, and that he would be the person driving the vehicle more often than any other person.
OSTI listened to the recorded underwriting and assessment conversations provided by the insurer and found that material facts relating to the regular driver of the vehicle were misrepresented. Moreover, the insurer’s decision to reject the claim and cancel the policy was based on information provided by the policyholder and his son to the insurer during the validation of the claim. Based on the above, OSTI concluded that the insurer was within its rights to cancel the policy and reject the claim.
A policyholder must fully disclose all matters relevant to the insurer's assessment of the risk when requesting insurance cover or updating the cover. This is founded on the insurer’s right to be informed of all the material facts to enable it to properly assess the risk. Most policies contain an obligation on the insured to provide true and complete information.
In terms of Section 53(1) of the Short-term Insurance Act 58 of 1998, insurers are prohibited from avoiding contracts of insurance unless the policyholder is found to have misrepresented information which was “likely to have materially affected the assessment of the risk under the policy concerned at the time of its issue or at the time of any renewal or variation thereof”.
ENDS
"The Ombudsman for Long-term (life) Insurance and the Ombudsman for Short-term (non-life) Insurance, together put almost R400-milion back in the hands of consumers who complained in the past financial year.
In a joint 2021 Annual Report, the Ombudsman for Long-term Insurance (OLTI) noted that R200 million was recovered for complainants while the Ombudsman for Short-term Insurance (OSTI) said the monetary benefit for consumers amounted to R197 188 388..."
OSTI's Service Charter reflects OSTI’s values and explains what a complainant and insurer can expect from the office during the registration and investigation of a complaint, and, in turn, what OSTI requires in order to register and investigate a complaint.
An increasing number of motor vehicle accident insurance claims are being rejected and disputed on the strength of a clause in insurance policies, namely the reasonable precautions clause, the Ombudsman for Short-Term Insurance (OSTI) has announced...
Honesty is the best insurance policy. Blatantly lying or omitting the truth when claiming puts you on a slippery slope. If you get caught committing insurance fraud, you not only could have a claim denied but could experience more extreme consequences...
Short-term insurance contracts operate on good faith and it is the insured’s responsibility to disclose all material facts that may reasonably be expected to enable the insurer to properly assess the risk...
The policy provided that insured valuables that are governed by the “close personal custody and control requirement”, in it means that the insured property shall be “held by, worn or attached to the insured at all times whilst in transit.”...
Please download the OSTI Press Release regarding the COVID-19 Pandemic below.
The insurance industry will have a single Ombudsman from 1 January 2020. He is retired Judge, Mr Justice Ron McLaren who brings with him a wealth of judicial experience and knowledge in dealing with and resolving insurance disputes.
Download the full press release below.
"...The report highlights a worrying trend in car insurance: an increasing pressure on you, the policyholder, to prevent loss or damage to your car by taking 'reasonable precautions'..."
Read the Eye Witness News article here: Majority of people haven't insured their household contents - Ombudsman (ewn.co.za)
"Always keeping your car in good nick and regularly serviced could well be to your advantage in the event that an insurer disputes a claim on the basis that the vehicle was in an unroadworthy state.
The Ombudsman for Short-Term Insurance recently ruled in favour of an insured who was able to produce proof that his vehicle had been serviced three days before it was in an accident.
In his Details of Complaint, the insured said his vehicle hit the rear side of a taxi that was stationary, had no hazard lights and no triangle to warn that it was stopped.
“Upon realising that the taxi was not moving, I tried to move to the next lane. An oncoming vehicle could not make way for me to overtake the taxi which then resulted in me hitting the rear side of the taxi,” said the insured.
The insurer had rejected the claim based on the assessor’s report which stated that the rear tyres were smooth, thereby rendering the vehicle unroadworthy.
The insurer said that the assessor had inspected the tyres and found that both rear tyres had excessive wear. The insurer pronounced the vehicle unroadworthy at the time of the accident and concluded that the poor condition of the tyres had directly contributed to the loss.
The insured said that the vehicle was taken for a service three days prior to the accident and the tyres were found to be in a roadworthy condition.
In the ruling, the Ombudsman said that the insurer had failed to prove that the unroadworthy tyres had caused the accident and recommended to the insurer that it settle the claim on the grounds that, as the insurer was relying on an exclusion, it had to prove on a balance of probabilities that the condition of the tyres was material to the cause of the accident, which it had failed to do.
“The insurer had not demonstrated that, if the insured had braked and the tyres were in a good condition, then the insured would have been able to avoid the accident,” said Senior Assistant Ombudsman, Darpana Harkison.
The Ombudsman considered the insurer’s findings and noted that the findings did not relate specifically to the circumstances of the insured’s accident in that they were based on generalised conclusions drawn by other experts based on other specific sets of circumstances. The insurer’s expert did not take into account the fact that the insured had been faced with and reacted to a sudden emergency.
Referring to the clause that the insurer relied on to reject the claim, the Ombudsman said: “This clause requires that the insured take steps to maintain the vehicle and considering that the vehicle was taken in for a service three days prior to the accident, this rejection reason cannot be upheld.
“In our view the insurer’s failure to prove that the unroadworthy tyres were the cause of the accident leads to the inevitable conclusion that it failed to discharge its onus of proof in relation to the exclusion being relied on in substantiation of its rejection of the claim.”
The insurer abided by the ruling and settled the claim."
Maintaining a vehicle can save a claim from being rejected (fanews.co.za)
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Vuyisile’s radio interview on YFM was done as part of OSTI’s Youth Month Public Relations campaign.
Vuyisile’s radio interview on YFM was done as part of OSTI’s Youth Month Public Relations campaign.
Chief Executive Officer of the Ombudsman for Short-Term Insurance, Edite Teixeira-McKinon, and the Director of Kapara Insurance Brokers, Morag Dover, join Bryan Hirsch in studio to discuss the insurance industry including power surge claims due to load shedding.
WATCH: The insurance industry and power surge claims due to load shedding: Part 1 - YouTube
The Ombudsman for Short-term Insurance discusses the recent flood damage to homes in KZN and homeowner’s insurance in general. Why claims may be declined and what consumers could do to avoid problems when claiming. View the interview here Yilungelo Lakho | 03 May 2022 - YouTube
View the ENCA interview here: KZN Floods | Unpacking insurance policy covers - Banoyi.com
A consumer workshop, addressing trending complaints, hosted by the Ombudsman for Short-Term Insurance (OSTI) featuring guest speakers from the Office of the Ombud for Financial Services Providers (FAIS), the Motor Industry Ombudsman of South Africa (MIOSA), the Ombudsman for Long-Term Insurance, The Credit Ombud, The Consumer Goods and Services Ombud (CGSO) and the Johannesburg Ombudsman.
The offices of the Ombudsman for Short-term Insurance (OSTI) and Long-term Insurance (OLTI) hosted a joint Consumer Workshop on 26 August 2021. The panel discussed:
For further information, please email [email protected] (Short-term Insurance) or [email protected] (Long-term Insurance). Media enquiries may be emailed to [email protected]
A training workshop presented by Senior Assistant Ombudsman, Mr. Peter Nkhuna, for the Insurance Institute of South Africa (IISA) on 28 July 2021 regarding OSTI's investigation and decision making process, particularly the application of fairness and equity.
The Ombudsman for Long-term Insurance (OLTI) and the Ombudsman for Short-Term Insurance (OSTI) recently had what it calls a “soft amalgamation” and have collaborated under the banner of “The Insurance Ombudsman” to bring you this production, which covers hints on funeral policies, credit life insurance, and case studies on motor insurance and business interruption cover. The production explains who or what is the ombudsman, what it does, and how it is done. It also reveals the ombudsman in action.
The Ombudsman for Long-term Insurance (OLTI) and the Ombudsman for Short-Term Insurance (OSTI) recently had what it calls a “soft amalgamation” and have collaborated under the banner of “The Insurance Ombudsman” to bring you this production, which covers hints on funeral policies, credit life insurance, and case studies on motor insurance and business interruption cover. The production explains who or what is the ombudsman, what it does, and how it is done. It also reveals the ombudsman in action.
"When times are hard and consumers find themselves in a tight financial situation, and they are forced to cut down, research shows that the first things consumers cut, to free up funds, is insurance. But is it a clever move?"
Each matter is dealt with on its own merits and no precedent is created by the findings in these matters. The case-studies are intended to provide guidance and insight into the manner in which this office deals with complaints.
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