When insurers and consumers miss the mark

 

The complaints procedures by insurance companies do not seem to match consumer expectations. Here is why, writes Neesa Moodley
A large number of complaints to the long-term insurance ombud over the past year related to insurers failing to meet consumer expectations. Long-term insurance ombudsman Ron McLaren says the reasons for the divergence between consumer expectation and reality included:
. The inappropriate marketing of policies;

. Unclear or unusual policy wording; and
. A lack of ongoing communication between the insurer and the policyholder.
Commenting on his office’s annual report for last year, McLaren said that, as long-term insurers started to implement the treating customers fairly (TCF) principles, the complaints to his office dropped.
While there is no specific date for the implementation of TCF regulations, the Financial Services Board has said it expected regulated entities to already be applying fair treatment principles in their overall business processes.
McLaren said while a few insurers were implementing TCF, there was a discernible failure on the part of others to apply the principles.
The office received 9 246 written requests for assistance last year, a reduction of 8% over the previous year. It finalised 3 822 complaints against long-term insurers and recovered more than R147 million for consumers, while awarding more than R450 000 in compensation for poor service. About 74% of the cases were finalised within six months and nearly 30% were resolved wholly or partially in favour of complainants.
NONDISCLOSURE
Half of the complaints received by the ombudsman’s office included claims that were refused on contractual terms or “nondisclosure”. If an insurer finds you failed to disclose pertinent information when you applied for a policy, it has the right to decline your claim, or it must treat your claim as it would have if you had disclosed the information in dispute. For example, assume that you failed to notify the insurer on your disability insurance form that you are a heavy smoker. The failure to disclose this affects the premiums, which would have been higher if the insurer was aware you were a heavy smoker. So, at claims stage, the insurer would have to go back and work out what policy would have been issued to you and the premiums you should have paid, and will adjust your payout accordingly.
PROOF OF INSURABILITY
McLaren said a new type of complaint encountered in the past year involved the timing of proof of insurability.
In particular, the problem related to policies that asked applicants if they had an HIV test that came up negative in the preceding three years.
If the answer was yes, the policy was sold and the applicant did not have to provide proof of the test. However, if a claim was instituted on death, the insurer might require proof of the HIV-negative result.
“This case is still under consideration,” he added.
INSURERS IN HOT WATER
When publishing data this year, the office of the long- term ombudsman released not only details of individual insurer complaints, but the names of those insurers who received more than five “second reminders” from the ombud’s office.
When you send a complaint to the ombud, it is forwarded to the relevant insurer for a response. The insurer has four weeks to send this response. If, after four weeks, the insurer has not responded, the ombud’s office sends the insurer a second reminder with a new timeline of five working days for a response. The following insurers received more than five “second reminders” from the ombud’s office, which indicates a tardy attitude towards consumer complaints:
Insurer and Number of second reminders
. African Unity Insurance 7
. AIG Life 14
. Assupol Life 34
. Momentum 15
. Nestlife Assurance 16
. Sanlam Sky Solutions 38
. Union Life Limited 24