Your insurance company has to answer to the Ombudsman!

We often refer to the rights and duties of the insured client but fail to focus on the obligations of the insurance company! During the past week we referred to the duty on the clients to make a full and complete disclosure when purchasing business Insurance.

Once the insurance policy has been purchased, and the client performs as required under the terms and conditions of the policy, the insurer has to provide the cover as agreed upon. The obligations also go further – the insurer has to provide answers to the client when dismissing his claim. If such rejection/ dismissal is disputed and the claim is taken to the Ombudsman, the insurer will also have to provide answers to the questions raised by the Ombudsman. Failure to do so may result in a ruling against the insurer!

We would like to discuss this with reference to formal ruling by the Ombudsman – but it is best to start by providing some insights on the Office of the Ombudsman.

Who is the Ombudsman?

The Ombudsman is not one person, but an independent office of well qualified people employed to assist the consumer and insurer in the event of a conflict arising from an insurance claim! Established in August 1989, The Office of the Ombudsman for Short-Term Insurance provides consumers with a free, efficient and fair dispute resolution mechanism. It offers consumers with a “no risk” mechanism to resolve disputes with insurers.

What assistance can be provided by the Ombudsman?

The Office can assist consumers with the following personal lines short-term insurance:

* Motor

* Houseowners (Buildings)

* Householders (Contents)

* Cell phone

* Travel

* Disability

* Credit protection insurance

Commercial Insurance on a Limited basis, i.e. claimants such as small businesses, including a sole proprietor or trader, a juristic person, partnership or trust that has a turnover in the last financial year of less than R8 million. Claim disputes, which the Office can assist with, include fire and allied perils (if there is an involvement of loss of profits/interruption, the entire claim will not be dealt with by the Ombudsman’s Office), glass, theft, motor, travel, sickness and accident and SASRIA claims (affiliated to the aforesaid covers).

But will the insurer listen to the decision by the Ombudsman?

The Office of the Ombudsman for Short-Term Insurance has been granted recognition in terms of the provisions of the Financial Services Ombud Schemes Act. All personal lines short-term insurers have agreed to abide by the Ombudsman’s decision.

The Ombudsman’s task is to act as a “mediator” or informal arbitrator and he/she does not represent either of the parties to the dispute.

The consumer needs to be aware of the following aspects:

* The consumer must complain to his /her insurance company first and only if unable to resolve the dispute with your insurer, then he/she can refer the matter to the Ombudsman’s Office

* The Ombudsman’s decisions are binding on the insurance company but not on the consumer – it does not take away the other legal remedies available to the consumer.

* The Ombudsman’s Office is an independent office

* The Ombudsman’s decisions can be based on either law or equity The Ombudsman’s Office does not give legal advice

* The service is free to insured consumers

Example of Formal Ruling by the Ombudsman

[No or insufficient responses from insurer – Deadline given to insurer by Ombudsman – Formal rulings made if warranted on prima facie evidence]

Problems were experienced with one particular insurer who did not respond adequately to enquiries from the Ombudsman’s office. A meeting with the insurer was convened and a deadline was given by the Ombudsman for the insurer to respond on various matters. The responses received were again not adequate. The matter was brought to the attention of the Managing Director of the insurer concerned and a final deadline was given, failing which the office would consider binding rulings.

A number of matters were again not dealt with adequately by the insurer by the time the deadline expired.  The Ombudsman considered the facts of each case as provided by the complainant. In 8 of the matters it was decided that the complainant has made out a prima facie case for the claim to be entertained. As the insurer elected not to respond to the complaint, binding rulings were made in these cases.

(Note- the rulings had the desired effect and that particular insurer is now cooperating with the office.)

Comments by the Ombudsman

It is unfortunate when the insurer does not afford the Ombudsman’s offices the necessary cooperation in order to finalise matters in a speedy cost-effective, objective, informal and fair manner. This lack of cooperation undermines the very functioning and essence of an Ombudsman ‘s function.

It not only places the Ombudsman’s offices in a bad light, but also does very little to allay the insured’s fears and suspicion that Insurers gladly accept his premiums, but that when a claim arises an insurer is more likely to look for reasons to reject a claim, than in fact to settle it. It is the view of this office that these misapprehensions of the insurer reflect badly not just on this office or the insurer concerned, but casts the whole insurance industry in a very poor light.

Conclusion and Advice

The Office of the Ombudsman is a very important component in the swift and efficient process of dispute resolution between a client and an insurer. It helps to avoid long and costly legal processes and provides clarity to both clients and insurers on how different scenarios are to be dealt with.

On Insurancechat.co.za we will share many of these rulings and discuss their importance to the insurance industry!