Insurance Ombudsman puts R300 million back into consumers’ pockets

The Insurance Ombudsman has put R300 million back into consumers’ pockets and resolved more complaints than in 2019, according to its annual report released on Tuesday.

The report shows that the office of the Ombudsman for Short-term Insurance recorded refunds to the value of R119,548,901.55 to consumers, while the office of the Ombudsman for Long-term Insurance recovered R177.9 million for complainants. This report was the first joint report since the soft amalgamation of the two ombud offices.

Long-term insurance complaints

The long-term ombud received 14,198 written requests for assistance in 2020 (11,915 in 2019) which included 6,756 chargeable complaints. A total of 6,512 complaints were finalised, including 3,624 full cases that were finalised, with 31.73% wholly or partially in favour of complainants.

The biggest cause for complaints was declined claims at 50%, slightly more than the 47% in 2019. The long-term insurance ombud received 456 complaints directly related to Covid-19 or the lockdown, of which 36% were about credit life benefits mainly about retrenchment and the inability to earn an income.

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Claims for retrenchment and inability to earn an income caused the most number of complaints, which is perhaps not surprising as the economy suffered and these are also the more contentious claims.

Complaints about credit life accounted for 164 complaints, disability for 12, funeral insurance for 111, life insurance for 134 and health insurance for health 31 complaints. Many policies also lapsed because consumers could not keep up their premiums.

Short-term insurance complaints

Osti registered 11,095 new complaints, 7% more than in 2019 and closed 10,805 complaints, which was 17.9% more than in 2019. A total of 786 (7%) complaints related to Covid-19, with 562 about business interruption insurance and 224 about travel insurance.

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The majority of these complaints related to motor vehicle disputes (36%), followed by homeowner/building disputes (21%), commercial insurance (14%) and household contents (5%). The other 24% was related to other types of cover and general policy queries.

Problems with Covid-19

The nationwide lockdown and government regulations to combat the spread of the coronavirus pandemic also had an impact on short-term insurance complaints. The number of motor vehicle-related complaints was 12% down on 2019, the lowest in the last five years, while complaints about commercial insurance increased 5%, with the majority relating to business interruption claims.

Some of the business interruption complaints were about extended business interruption cover for infectious/contagious diseases. The main question was if the government-imposed lockdown or Covid-19 was the direct cause of the business interruption. In the end, R5,490,182.16 was paid out to businesses for business interruption claims thanks to the interim payment relief arrangement between the industry and the Financial Sector Conduct Authority.

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Most of the short-term insurance complaints about homeowners insurance (47%) was the rejection of claims based on policy exclusions for damage caused by defective design, construction or workmanship, wear and tear and lack of building maintenance.