As the COVID-19 pandemic continues to affect the livelihoods of many South Africans, most short-term insurers have implemented various forms of relief for their customers.
This is in line with the recent FSCA Communication 12 of 2020 (General) which emphasised that regulated entities should bear current circumstances in mind and assist their customers with even more empathy, flexibility and understanding during these difficult times. “This may include considering relief and support options, especially for vulnerable customers. Entities must ensure that all customers are treated fairly during the entire product cycle, from advertising, to sales, to claims, to renewals and complaints. Profiteering off those that are vulnerable and suffering will not be tolerated.”
In addition, the FSCA also published an amended exemption notice related to short-term insurance that aims to facilitate, at the discretion of the insurer, the delivery of premium relief to policyholders without impacting intermediary commission.
Most of the top ST insurers as per this years’ South African Customer Satisfaction Index immediately responded and announced relief measures for their customers. “We are absolutely committed to playing our part to help alleviate some of the devastating impacts of this virus. We are listening to our clients, monitoring the impact of this pandemic, and where we are able to provide additional assistance, we will do so in a fair and responsible manner. As a proudly South African business, we are dedicated to helping our fellow compatriots by implementing real solutions that make a tangible impact on peoples’ lives,” said Lizé Lambrechts, Santam CEO.
Danie Matthee, OUTsurance CEO agrees: “We understand that many of our clients are under immense financial strain during this unusual time. We want them to know that we are here for them.”
Some of the relief measures include:
| ● | Virseker announced a R35 million premium relief to their customers. |
| ● | Santam announced that it will refund 20% of motor premiums paid in April for all its personal lines and commercial lines clients. This equates to R155 million and will bring the Group’s collective COVID-19 relief efforts to R400 million. |
| ● | OUTsurance has implemented a 15% premium discount on all existing vehicle insurance policies for the month of May 2020. |
| ● | Old Mutual Insure is offering various relief options available to customers. |
“If you downscale your cover during the lockdown and revert to the original cover within 10 working days after the lockdown ends, Momentum will keep your premiums the same, provided that there is no material change in the risk,” Etienne Du Toit, chief commercial officer at Momentum short-term insurance, also commented. Du Toit mentioned to a BusinessLive reporter that “downscaling is better than cancelling because even if, for example, your vehicle is parked at home because you are working from home, it is still exposed to fire or theft. If your vehicle is financed, your bank or any other credit provider will still expect you to comprehensively insure the vehicle.”
In a communication, Santam indicated that, “…in accordance with the dispensation provided by the FSCA, we are pleased to confirm commission and outsourced fees will not be impacted by this initiative.”
With all these measures, insurers are truly embracing the Treating Customers Fairly (TCF) principles. Sustaining this could stand the industry in good stead when the next round of regulatory reform is considered, Christine Rodrigues, partner and insurance law specialist at law firm Bowmans recently shared in an Independent Media article.
“In South Africa, under the Policyholder Protection Rules, a grace period for premium payment is required by law, and the Financial Sector Conduct Authority has reminded insurers of this requirement and to ensure that the non-payment of premiums does not automatically result in a lapsed policy.”
She also notes that principles of TCF that bind all insurers do not mean the customer is always right. TCF does also not mean that each and every claim needs to be paid where the policy does not provide cover.
According to Rodrigues what it does mean is where the policy:
| ● | Does provide cover and a claim is made, it must be settled in a reasonable time period. |
| ● | Does or does not provide any cover, insurers should be highlighting this to consumers. |
| ● | Is “grey” in its terms and conditions, insurers should be making educated claims decisions. For example, if the claim is rejected, what is the impact on that person or business? “Perhaps a partial ex-gratia claim needs to be considered,” says Rodrigues, “obviously always ensuring that this does not result in a financial strain on the insurer which is to the detriment of the rest of its policyholders.” |
Business interruption
According to an article in Business Times, one of SA’s biggest insurance companies has scrapped cover for infectious disease claims in the hospitality industry as from 24 April, prompting protests from some affected clients. “I am not sure if this is even legal, but it is certainly morally reprehensible,” one business owner reportedly told Business Times.
The virus is certainly a totally new threat to the solvency margins of insurers, and its long-term impact is currently under serious consideration. Most current contracts already contain an exclusion clause as far as AIDS is concerned, as well as limitations on the term of cover for any infectious or contagious diseases. The latter is likely to be excluded in future in similar fashion to AIDS.
The legitimacy of simply cancelling cover, however, is very likely to be tested in court. The morality of such action should be measured against the expected outcomes of Treating Customers Fairly. TCF, as we know, is not a set of rules one can tick off – it has to be reflected in your actions.
In a recent publication, the FSCA indicated that insurers who wish to effect changes were obliged to discuss it with the regulator first. One trusts that this requirement, if met, will ensure socially responsible decisions.
