Changing SIM cards may void cellphone insurance claims

Did you know that any insurance claim you submit for loss, damage or theft of your cellphone may be repudiated because of a failure to advise your insurer that a different SIM card is being used in your device?

This issue surfaced in a recent complaint submitted to the Ombud for Financial Services Providers (Fais) by Ms S after her insurance claim was rejected due to the insured device not being used with the listed SIM card.

ALSO READ: How AI could help solve your insurance claim troubles

Ms S stated that she specifically disclosed to the consultant during the device upgrade that her son would be using the new device with a different SIM card, and she was advised and reassured by the consultant that the device would remain insured.

After an investigation by the Office of the Fais Ombud, the insurance provider agreed to reverse its decision and agreed that the claim should be honoured, considering the advice provided by its consultant.

Consumers urged to review insurance policies

Fais Ombud John Simpson said cellphone retailers often offer cellphone insurance as part of selling or upgrading new devices.

However, he said the terms and conditions of the policy document can be very complex, and the material aspects of the policy must be explained to consumers.

ALSO READ: Shopping for insurance? Ask these 4 questions

A lack of transparency can result in consumers not fully understanding the coverage provided by their policy, leading to problems during the claim stage, he added.

Simpson urged all consumers to thoroughly review their insurance policies, understand the requirements and applicable conditions, and contact their insurance provider for clarity if there are any areas they do not understand.

“Should you believe that you have been financially prejudiced because of the financial service rendered to you with respect to a regulated financial product, please lodge a written complaint directly with the service provider,” he said.

SIM requirement ‘commercial and risk-based’

Kabelo Teme, a spokesperson for the National Financial Ombud Scheme, which was established by amalgamating four financial sector ombud schemes – the Credit Ombud, the Ombudsman for Banking Services (OBS), the Ombudsman for Long-term Insurance (OLTI) and the Ombudsman for Short-term Insurance (OSTI) – said the reason provided to its office by the industry for the policy condition requiring the specified SIM card to be in the device at the time of loss is both commercial and risk-based.

Teme said the commercial aspect is that the consumer is offered a discounted premium because they are using a SIM card belonging to that specific network service provider, while the risk-based policy aspect is that it also assists the insurer in detecting fraudulent claims.

“We are of the view that the policy condition relating to SIM card usage is important in claims for theft, as insurers have found that some consumers were claiming for devices that were not stolen,” she said.

Benefits of device-SIM linking

Mthokozisi Ndlovu, a spokesperson for MTN, said MTN Device Insurance is a product underwritten and owned by Santam Limited.

Ndlovu said the terms and conditions of insurance are that the customer must use their insured device with their specified MTN number, the customer is allowed to list up to two MTN numbers, whether prepaid or postpaid, and they can also change the numbers at any time by calling the insurance administrator.

“Linking the SIM card to the insured device is a risk mitigating measure which enables the last known use of the device to validate the customer’s claim, which enables MTN or Santam to offer customers competitive premiums and insurance products,” he said.

He said the benefits to MTN clients of this policy requirement include risk mitigation and a quick turnaround time on the claims process for stolen devices while also providing access to insurance to all customers on an equal basis without individual underwriting.

A cellphone device and a SIM card are not linked for cellphones insured through Santam household contents policies.

Santam spokesperson Thabo Mabaso stressed that the MTN Device Insurance product was specifically created for MTN customers, and the terms and conditions are specific to this product and would differ from a ‘normal’ Santam short-term insurance policy where Santam Insurance only has one cover option of “all risk which includes mechanical, electrical, electronic break down cover” while the MTN Device Insurance allows for different cover options.

Vodacom spokesperson Vinnie Santu said that Vodacom operates its own insurance licence and is authorised to provide insurance products such as life, disability, funeral, device cover and other asset cover.

ALSO READ: New ombud scheme will handle complaints about insurance, banking and credit

Santu said their cellphone insurance terms and conditions state that the insured handset and SIM must be used simultaneously at the time of claim.

“We link SIM cards to devices as this allows us to be more efficient at [the] claims stage over and above offering better and attractive premiums,” she said.

Limited data on scale of issue

Teme confirmed the ombud receives many complaints related to this issue, but its statistics will only show whether the complaint relates to a claim for theft or damage to the device and that the dispute is about non-compliance with a policy provision.

“It will not show which provision in particular. Therefore, we are unable to indicate how many complaints we have received relating to this [specific] issue,” she said.

Teme added that the manner in which insurers underwrite their risks and determine which risks are acceptable to them falls within the insurer’s exclusive underwriting domain.

She said each insurer has the prerogative to decide under which conditions it is willing to provide cover, and it is similarly the consumer’s prerogative to decide whether the terms and conditions imposed by the insurer are acceptable and, if not, to approach another insurer.

Simpson said the Ombudsman for Short-Term Insurance has been dealing with these types of complaints for many years directly with the policies’ underwriters – and in the interests of consistency and to avoid jurisdictional overlaps, the Office of the Fais Ombud will be referring any future complaints in this regard to the new National Financial Ombud Scheme.

Are shop assistants providing financial advice?

Moneyweb asked Simpson if shop assistants selling an insurance product are not providing financial advice and should, therefore, be registered as such and, in terms of the code, keep a record of advice provided to customers.

Simpson said his office dealt with the matter in the context of the shop assistant only providing an intermediary service to the customer, with the customer simply provided with the option to accept or reject the product offered.

He said this process would be mainly clerical in nature and not involve providing any form of advice or recommendation.

“In our view, registration as a representative and adherence to all the requirements and processes in the Code was not required under these circumstances,” he said.

“However, it must be noted that the FSCA [Financial Sector Conduct Authority] is the entity ultimately responsible for Fais registration requirements.”

Ts & Cs are clear

Ndlovu said MTN Device Insurance customers are made aware of the usage terms and conditions during onboarding and fulfilment through a welcome letter, policy schedule and various messaging.

ALSO READ: Cellphone tech used to link Imanuwela David to Phala Phala burglary, court hears

Santu said the linkage of a cellphone device to a SIM card is clearly outlined in Vodacom’s policy documentation and terms and conditions. 

“Our agents inform customers of the terms, conditions and requirements to avoid repudiation of claims.”

This article was republished from Moneyweb. Read the original here