A surge in rejected insurance claims over the past year, as highlighted in the 2023 Ombudsman for Short-term Insurance (OSTI) annual report, underscores a critical gap in customer education.
The OSTI report indicates that a significant number of insurance claims were rejected in the past year, with almost 65% of car-insurance complaints referred to the ombudsman being accident claims declined because to policy exclusions.
“Most of them were due to a lack of due care or precaution in preventing or minimising loss, especially where speeding was involved, as well as misrepresentation or non-disclosure,” says Tarina Vlok, the managing director of Elite Risk Acceptances, a subsidiary of Old Mutual Insure.
The highest number of disputes, or 42% of overall claims, were related to motor vehicles. The second-highest number of complaints, at 25%, related to homeowners’ claims.
“Most of these claims were damage caused by acts of nature, yet insurers rejected them due to gradual deterioration, lack of maintenance and wear and tear, as well as design or construction defects,” says Vlok.
Read: Why policyholders complained to the short-term ombudsman in 2023
She adds what the OSTI report points to is a significant gap in customer education.
“Many customers don’t know what constitutes a valid claim and what’s required for a successful claims experience.”
For example, in one case in the OSTI report, the insured claimed for a collapsed boundary wall, attributing the damage to strong winds during a storm. However, the insurer rejected the claim, citing the wall’s poor condition because of weeds and a lack of maintenance. The OSTI ruled in favour of the insurer.
Ensure clients understand policy terms
Vlok underscores the importance of clients understanding their policy terms and conditions. “Each claim is carefully considered to determine whether the loss or damage fell within the ambit of the policy terms and conditions before it is rejected,” she says.
Brokers should remind clients to read their policy wording, schedule, and all correspondence carefully and to ask for clarification on any clauses they do not understand. They should also advise their clients to review and update their policies regularly.
Vlok recommends that clients should review their policy annually or whenever there are significant changes in their life circumstances. This helps clients to adjust their coverage to reflect changes in value or risk.
Brokers should also remind their clients to adhere to maintenance guidelines. For vehicle insurance, that means ensuring cars are serviced regularly according to the manufacturer’s recommendations. For buildings, emphasise regular maintenance, especially for roofs, waterproofing, and vegetation growing next to the property. Any significant changes, such as home renovations or car modifications, should be reported to the insurer immediately.
Guide clients on filing claims correctly
It is important that clients file claims correctly and promptly. Timely and accurate filing can significantly impact the success of a claim. Brokers should encourage their clients to consult with them if they encounter any issues.
Last, brokers should reinforce the value of their expertise. Vlok says a broker is there to understand the client’s policy and coverage. Clients should be encouraged to take advantage of their broker’s help and expertise as it will go some way to ensure a successful outcome to their insurance claim. By providing thorough and ongoing education, brokers can help clients to navigate their policies effectively and reduce the likelihood of claim rejections.
