If you don’t hold up your end of the deal, you could find yourself without cover when you need it most, writes Neesa Moodley-Isaacs
When it comes to motor insurance, you and your insurer each have certain obligations that you have to meet in order to render the insurance contract valid. As a policyholder, if you don’t hold up your end of the contract, you could find yourself without cover at a time when you need it most.
Nearly 50% of complaints received last year by short-term insurance ombudsman Dennis Jooste related to motor insurance, according to the ombud’s recently released yearly report.
There were several case studies included in the report, which hold valuable lessons for policyholders and also highlight the importance of having an ombudsman who can fight on behalf of the customer.
1 Insurer is not going to pay a claim if you broke the law
The complainant was in an accident and told RMB Structured Insurance that he was in the process of overtaking when the accident occurred. He noticed an oncoming vehicle and attempted to swerve to the side of the road, but lost control.
The insurer found that the complainant had been driving above the speed limit at the time of the accident and also attempted to overtake another vehicle on a barrier line.
The claim was declined because the policy clearly stated: “The insurer shall not be obliged in any way to settle or contribute towards any claim . . . where it is established that the designated driver was exceeding the speed limit or violating any applicable road or traffic laws at the time of or immediately prior to an event resulting in a claim.”
2 If you are covered for fire, the insurer has to settle the claim
Two separate complaints against Lion of Africa Insurance dealt with similar issues and in both cases the ombudsman found in favour of the client.
In the first case, the complainant’s car engine suddenly caught alight and the car was declared a write-off. However, the insurer rejected the claim on the grounds that the damage fell under a specific exclusion dealing with “wear and tear, mechanical or electrical breakdown or failures” as well as “consequential loss”.
The second-hand car, however, had been bought less than two months before the loss and had been declared roadworthy by the Automobile Association (AA) as well as by an approved dealer. Lion of Africa claimed that the fire was a result of a fuel-hose failure. But the ombudsman held that it was not “consequential loss”, which is an indirect financial loss and does not extend to direct loss suffered as a result of an insured peril.
The ombudsman pointed out that the insurer’s report also stated that the “probable” cause of fire was fuel-hose failure, and there was therefore a possibility that fuel-hose failure was not the cause or even the sole cause of the fire.
In the second case, the complainant’s car had an overheating problem and was taken to a service centre. About six days after it was collected, the engine suddenly caught on fire and the car was declared a write-off.
The insurer found that the damage was caused by a spark plug that had not been inserted correctly. This caused a fuel pocket, which built up and caused an ignition, which in turn led to the engine catching on fire.
The insurer argued that the fire was a direct result of the incorrectly fitted spark plug and that the service centre responsible for the repairs was liable for the loss. The ombudsman held that whether or not the spark plug was inserted incorrectly by the service centre, the damage did not fall under “consequential loss”.
The ombudsman ruled that the cause of damage was fire and not the mechanical issues. As fire was an insured peril under the policy, he ordered Lion of Africa to settle the claim.
3 Insurer is obliged to provide fulldisclosure when selling a policy
In this case, RMB Structured Insurance turned down a claim on the basis that the complainant had a clear understanding of what was and was not covered on their policy.
The ombud requested a recording of the sales conversation and found that the manner in which the call had been conducted was misleading. The name of the product created the impression that it provided comprehensive cover when this was not the case. The manner in which disclosures were made suggested that the insured wasn’t likely to have heard or understood the contents of the disclosure.
“Certain key words of a misleading nature had been uttered, which would have led the insured to assume that he would enjoy comprehensive cover,” the report states.
The insurer was ordered to settle the claim as if comprehensive cover had been provided.
A key lesson here is that you, as a policyholder, should make sure that you fully understand the terms and conditions as well as what type of cover you are paying for.
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