Insurance ombudsman gets R386 million back for consumers following complaints

The Ombudsman for Long-Term Insurance (OLTI) and the Ombudsman for Short-Term Insurance (OSTI) got R386 456 756 back for consumers in 2023 after they complained about insurance companies.

About half of the long-term insurance complaints were about denied claims, while about 40% of the short-term insurance complaints were about car insurance.

This week the OLTI and the OSTI published their last joint annual report before they were incorporated into the National Financial Ombud Scheme South Africa (NFO).

The NFO is an industry ombud scheme merging four separate former industry ombud schemes: the Ombudsman for Banking Services South Africa (OBS), the Credit Ombud (CO), OLTI and OSTI.

ALSO READ: Long-term insurance: Learn from these complaints

Complaints to long-term insurance ombudsman

OLTI recovered R283 084 553 for complainants in lump sums, an average of R1.14 million per working day, considering that there were 248 working days in 2023, while an additional R727 838 was awarded in 169 cases as compensation for poor service.

During 2023 OLTI received a total of 13 750 written requests for assistance, of which 6 714 were chargeable complaints or complaints within its jurisdiction. These numbers represent a decline in complaints of 16.7% for total complaints and 5.8% for chargeable complaints compared to the previous year, indicating a return to pre-Covid-19 levels. 

Denise Gabriels, Deputy Ombudsman for OLTI, says of the chargeable complaints, 5 506 were transfers which were not sent to the insurers to resolve first. Insurers settled 1 580 of these complaints directly.

OLTI finalised 6 342 cases, 3205 transfers and 3 137 full cases, with 86% finalised within 6 months of receipt. Gabriels says 26% of the full cases finalised were resolved in whole or partially in favour of the complainants.

“While the number of cases finalised decreased, the number of cases categorised as complicated increased, indicating the increased level of complexity of the cases being dealt with and the persistence of complainants.”  

Complaints about declined long-term insurance claims accounted for 50.3% of full complaints finalised, while funeral benefits accounted for 44% and life policies for 34%. 

Gabriels says OLTI issued four final rulings against insurers.  In one matter, the Appeal Tribunal overturned the final ruling of the Ombudsman and found in favour of the complainant.

ALSO READ: Insurance ombudsman get more than R300 million back for clients

Complaints to short-term insurance ombudsman

OSTI recorded a payment of R102 644 365 as the monetary benefit and value for consumers who approached the office for assistance with complaints about short-term insurance. The office ended the 2023 financial year by registering 5.6% more new complaints and finalising 1.2% more complaints than in 2022.

Edite Teixeira-Mckinon, CEO of OSTI, says her office ended the year with 12,188 registered complaints, compared to 11 542 in the previous year and closed 10 534 complaints compared to 10 411 in 2022.

“Over the last two years, OSTI experienced an increase of around 24% in new registered complaints while maintaining the same adjudicative staff complement. The main reason for keeping the staff complement the same was the risk of potential job redundancies going into the amalgamated scheme and the risk that complaint volumes may again decline as in 2021.”   

By the end of the year, the average turnaround time to resolve complaints was 142 days compared to 122 days in 2022. Of the 12 188 complaints registered, nine complaints were related to Covid-19, seven were Sasria-related complaints arising from the civil unrest in Kwa-Zulu Natal in July 2021, 220 were related to power surges and 167 were related to the KwaZulu-Natal floods of April 2022.

Teixeira-Mckinon says around 40% of all complaints were generated from motor vehicle insurance with the majority of these complaints involving accident-related claims that were declined on the basis of an exclusion in the policy.

ALSO READ: Short-term insurance cover important in times of severe weather

Lack of due care and prevention

“The predominant exclusions were a lack of due care or precaution in preventing or minimising the loss, especially in claims involving speeding, followed by misrepresentation or non-disclosure at the time of taking out the policy or during the term of the policy and at claim’s stage.”

The second highest number of complaints, at around 25%, related to homeowners’ claims declined based on policy exclusions. She says the majority of these claims related to damage caused by acts of nature and were declined based on gradual deterioration, lack of maintenance and wear and tear, followed by defects in design or construction.      

OSTI recorded a resolved ratio of 16%, a decline of 2% compared to the 18% recorded in 2020, 2021 and 2022. The resolved/overturn ratio is an indicator of complaints where the insurer’s decision or approach was changed by the office with some additional benefit to the insured.

The office issued two final rulings against the same insurer. In both cases, the insurer agreed to abide by the rulings.

ALSO READ: Financial service provider giving you problems? The NFO can help

Moving OLTI and OSTI to the NFO

The World Bank published a report on the role of the financial sector ombud system in South Africa in June 2021. The report recommended that the overall ombud system and its components be reformed to make it fit for purpose and adequately address the complexity of the South African financial system.

The OBS, CO, OLTI and OSTI entered into discussions early in 2020 to explore a voluntary amalgamation and the culmination of the work of the four ombud schemes resulted in them being replaced by the NFO.

Gabriels said in the annual report that preparing for the amalgamation was the dominant focus of 2023, alongside fulfilling the primary mission of resolving complaints. The amalgamation also marked the end of an era for OLTI which was established in 1985 and had an illustrious history. Over the last ten years, OLTI returned close to R2 billion to complainants.

“The recognition of the NFO Scheme marks a significant shift in the financial ombud landscape. The scheme is the successful outcome of a substantial project to amalgamate four previous industry ombud schemes and to develop the governance model, funding and a single case management system.

“All complaints received before 1 March 2024 will be dealt with by the NFO in accordance with OLTI’s previous rules and new complaints, as well as any applications for leave to appeal received from 1 March, will be dealt with in terms of the NFO Rules.”

Teixeira-Mckinon, CEO of OSTI, says this is her fourth and last report as the CEO of OSTI, marking the end of a chapter in OSTI’s history and the beginning of a new one filled with exciting opportunities and learnings.