In one of the case studies discussed in the latest Short-Term Ombudsman Briefcase, readers are reminded of Rule 15.1 of the Policyholder Protection Rules. This states that policies must contain a provision for a period of grace within which to make payment of a premium after the due date. This period of grace must not be less than 15 days and only applies from the second month of the policy. Failure to make payment of the premium for one month would entitle the insurer to decline cover for that month. Therefore, outside of the 15 days, insurers are contractually entitled to reject a claim.
The question that arises now is how this rule will apply during lockdown. Will there be a relaxation of the rule at all? Especially as many South Africans are experiencing the financial burden of the lockdown. Will claims be settled at all?
The South African Insurance Association (SAIA) published a media release to inform the public of the impact on claims during the national lockdown. SAIA and its members remain committed to providing the required essential services to its clients during this period as the insurance industry is deemed an essential service in terms of the Disaster Management Act.
It should therefore be understood that claims processing will proceed, but be limited to the extent that the activity is classified as “essential” under the latest regulations on essential services. Any other claims will be resolved only once the lock-down ban has been lifted (for example, repair/replacement of certain insured items/assets).
Furthermore, premium collection remains an integral part of ensuring both the operational sustainability of insurance companies and their ability to settle any valid insurance claims made by policyholders.
However, the industry also recognises that the current circumstances are not business-as-usual, and therefore require a more pragmatic approach. Policyholders who experience financial difficulty due to COVID-19 and the national lock-down are strongly encouraged to speak to their financial intermediary or insurer, who will do their utmost to assist customers in good standing on a case-by-case basis.
Various short-term insurers have published guidelines on how they will assist during the next few weeks to make it easier for their clients.
“We follow a scientific approach to risk rating. When clients work from home, they drive less. This reduces the risk of them being involved in an accident. At MiWay, we believe the right thing to do is to reduce their premiums given the reduction in risk,” says MiWay CEO René Otto in a statement.
Santam also introduced various ways to assist their clients. R135 million will be made available towards helping qualifying Santam clients in financial difficulty – both personal lines clients and SMMEs, with premium relief support over the next two months.
Old Mutual Insure and many others have followed and are also offering leniency on missed debit orders where customers have lost or have experienced reduced income as well as a premium deferment option, with a delayed pay-back over a set period.
Please read the full SAIA media statement, linked above, and forward to your clients to assist understanding.
All insurers are invited to send us their guidelines to share with financial advisers and their clients.
