Ina Opperman

By Ina Opperman

Business Journalist


Report from ombud gives valuable lessons about car insurance

The case studies show that brokers and representatives of insurers must help you to make an informed decision about car insurance.


In the previous financial year, the FAIS Ombud’s office received 4 501 complaints about financial service providers. According to its annual report, the Ombud made an award to the consumer in 35% of the cases, with R39.5 million in compensation awarded to consumers.

The main objective of the Ombud for Financial Service Providers (FAIS Ombud) is to investigate and resolve complaints in terms of the Financial Advisory and Intermediary Services (FAIS) Act.

However, the most valuable part of the report for consumers is the case studies where we can learn from other consumers’ complaints and see how they were resolved. Most of the case studies in the FAIS Ombud’s annual report dealt with complaints about car insurance and in most cases the ombud’s office was able to negotiate a settlement in favour of the consumer.

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Insurers must be specific about need for a tracking device

A consumer complained that his insurer would not pay out his claim in full after his bakkie, with his business tools and several personal items, including his wife’s ring, were stolen while he was on holiday.

The insurer was happy to pay for his vehicle claim, but said there would be an additional theft excess as the bakkie was not fitted with a tracking device. The vehicle finance account would also not be fully settled as the outstanding balance was more than the bakkie’s retail value. The insurer would also not pay for the wedding ring as it was not listed on the policy.

The consumer asked the ombud to help because he wanted the insurer to pay R204 164.48 for the ring, the theft excess and the shortfall cover to settle the amount with the bank.

However, the insurer said when the bakkie was added to the consumer’s policy it had the same benefits as the vehicle it replaced. The insurer also sent him the policy schedule and a “vehicle template”, requesting that he complete the outstanding information.

This included the shortfall option, which was not completed. The vehicle template also stated that the bakkie was high risk and must have a tracking device installed.

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Duty on insurers to explain car insurance contracts

The ombud says the General Code of Conduct for Authorised Financial Services Providers and Representatives places a duty on financial services providers to provide a reasonable and appropriate general explanation of the nature and material terms of the contract.

There was no evidence that the insurer gave the consumer any explanation of the material tracker requirement or alerted him to this important requirement. The ombud says emailing a standard template was not reasonable or adequate to comply with the Code.

The insurer specifically needed to draw the consumer’s attention to the fact that a vehicle tracker was required.

However, as shortfall cover is an optional product and not a material term of a contract, the insurer was not held responsible for the consumer not choosing the product. The consumer also did not specify the rings in the policy and therefore the insurer was not liable for this loss.

The ombud’s office recommended that the insurer pay for the theft excess of R45 012 with interest of 11.75% per year from the date of the loss and the insurer agreed to.

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Insurer must tell you about shortfall cover

A consumer asked the ombud for help after the insurer only paid out the market value of his car after it was written off in an accident, leaving him with a sizeable amount still owing at the bank. The consumer said the insurer never told him that shortfall cover was optional.

However, during the sales call, he asked for the highest cover as the bank financed the car. The representative confirmed that the consumer got the best cover and that the car would be covered if it was written off after an accident.

The ombud says the representative’s statement strongly implied that the consumer would be covered in full, inclusive of shortfall cover. The representative specifically stated that he would be covered if the vehicle was written off, which in this case occurred.

The consumer was not obliged to raise the issue of shortfall cover, as specific product knowledge of this nature was within the representative’s knowledge and expertise, not his.

The Code requires an advisor to provide all the information necessary for the insured to make an informed decision and according to the ombud a reasonable representative would have told the consumer about shortfall cover.

The consumer made it clear that he required full and adequate cover, including shortfall cover and the representative should have explained this type of cover to avoid uncertainty. There is a high probability that the consumer would have accepted the shortfall cover and the claim would have been paid.

The ombud’s office recommended that the insurer pay the shortfall of R72 671.77 and the insurer complied.

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Not your problem if policy was moved

Another person complained that a claim for damage to her car after an accident was rejected because it was moved to another broker and cancelled the previous month. She was not notified of any changes to her policy and was under the impression that it was active with the insurer. She suffered a financial loss of R26 418.95.

The insurer said its offices were “not properly informed of this particular policy” and blamed the underwriting manager for the errors made.

However, the ombud’s office referred the insurer to Section 2 of the Code which states that a provider must at all times render financial services honestly, fairly, with due skill, care and diligence and in the interests of clients and the integrity of the financial services industry.

The insurer should have applied its duty of care and discuss any policy changes with the consumer. The ombud’s office said the insurer’s dispute with the underwriting manager did not change its duties and responsibilities in terms of the Code and it failed to advise the consumer properly. The insurer agreed to the office’s recommendation that it settle the claim of R26 418.95.

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Insurer must notify you of unpaid premiums

A woman complained to the ombud’s office that her insurer rejected her claim after her car was damaged in an accident because her bank reversed the last policy premium payment. The consumer notified her broker about a month before the accident that her banking details had changed, but her broker did not make the change.

The broker confirmed that it received the changes to the policy but said it did not see the change in the banking details request. Subsequently, two consecutive premiums were not paid. The consumer said it was only after she claimed that the insurer informed her of the two unpaid premiums and that the claim was repudiated.

The broker said if the insurer notified him in time that the premiums were unpaid, he would have notified the consumer. The consumer also said that the insurer did not contact her about the unpaid premiums. The broker said the insurer was responsible for the consumer’s loss.

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Brokers must ensure well-being of clients

However, the ombud’s office said the very nature of the broker’s work requires that it be entrusted with the financial well-being of its clients.

All the other changes communicated to the broker via WhatsApp had been actioned, which confirmed that the instruction was received but not actioned by the broker. In addition, the consumer mandates a financial services provider and/or its representatives to carry out specific instructions.

This agreement requires the financial service provider to exercise the requisite due care and skill in executing the insured’s mandate, as provided for in Section 2 of the Code. Despite the insurer’s actions or omission, the office recommended that the broker resolve the consumer’s claim.

The broker ultimately requested all the invoices and bank statements regarding the vehicle’s repair from the consumer and settled an amount of R256 800.

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