Ombud's report provides valuable lessons about car insurance

The case studies show that insurance brokers and representatives should help you make an informed decision about car insurance.

Last financial year, the Office of the Ombudsman FAIS received 4,501 complaints about financial services providers. According to its annual report, the Ombud awarded a reward to consumers in 35% of cases, with R39.5 million in compensation awarded to consumers.

The main purpose of the Ombudsman for Financial Service Providers (FAIS Ombud) aims to investigate and resolve complaints under the Financial Advisory and Intermediary Services (FAIS) Act.

However, the most valuable part of the report for consumers are 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 concerned car insurance complaints and in most cases the ombudsman’s office was able to reach a settlement in favor of the consumer.

Insurers must be specific about the need for a tracking device

A consumer complained that his insurer would not pay out his claim in full after his bakkie, containing his business belongings and various personal items, including his wife’s ring, stolen while he was on vacation.

The insurer was keen to cover damage to his vehicle, but said there would be an additional deductible for theft because the bakkie was not fitted with a tracking device. The car finance account would also not be fully settled because the outstanding balance was more than the retail value of the bakkie. The insurer would also not pay for the wedding ring because it was not on the policy.

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

However, the insurer said that when the bakkie was added to the consumer policy, it had the same benefits as the vehicle it replaced. The insurer also sent him the policy schedule and a ‘vehicle template’ with the request to complete the outstanding details.

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

Obligation for insurers to interpret car insurance contracts

The ombudsman says the General Code of Conduct for Authorized 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 are no indications that the insurer has explained the material tracker requirement to the consumer or made him aware of this important requirement. The ombudsman says emailing a standard template was not reasonable or sufficient to comply with the Code.

The insurer wanted to specifically point out to consumers that a vehicle tracker was needed.

However, because shortage coverage is an optional product and not a material provision of a contract, the insurer could not be held responsible for the consumer’s failure to select the product. The consumer also did not specify the rings in the policy and therefore the insurer was not liable for this damage.

The ombudsman’s office advised the insurer to pay the theft deductible of R45,012 with interest at 11.75% per annum from the date of the loss, and the insurer agreed.

The insurer must inform you about the coverage against shortages

A consumer asked the ombudsman for help after the insurer only paid out the market value of his car afterwards written off in an accident, which means he still owes a significant amount at the bank. The consumer said the insurer never told him that shortage coverage was optional.

However, during the sales meeting he asked for the highest coverage, since the bank was financing the car. The representative confirmed that the consumer was receiving the best coverage and that the car would be covered if it were written off after an accident.

According to the ombudsman, the representative’s statement strongly implied that the consumer would be fully covered, including shortfall coverage. The representative specifically stated that he would be covered if the vehicle was written off, which happened in this case.

The consumer had no obligation to raise the issue of deficiency coverage because specific product knowledge of this nature was within the representative’s knowledge and expertise, and not his.

The Code requires an adviser to provide all information necessary for the insured to make an informed decision and, according to the ombud, a reasonable representative would have informed the consumer of the deficiency cover.

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

The ombudsman’s office advised the insurer to pay the shortfall of R72 671.77, which the insurer complied.

Not your problem if the policy is moved

Another person complained that a claim for damage to her car after an accident was rejected because it had been moved to another broker and canceled the month before. She was not informed 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 specific policy” and blamed the underwriting manager for the mistakes made.

However, the Ombudsman Service referred the insurer to Article 2 of the Code, which states that a provider must at all times provide financial services fairly, honestly, with due skill, care and diligence and in the interests of the customer and the integrity of the financial services. industry.

The insurer should have exercised its duty of care and discussed any policy changes with the consumer. According to the ombudsman, the insurer’s dispute with the underwriting manager has not changed its duties and responsibilities under the Code and has failed to provide proper advice to consumers. The insurer agreed to the office’s recommendation to settle the claim of R26 418.95.

The insurer must notify you of unpaid premiums

A woman complained to the ombudsman that her insurer had rejected her claim after her car was damaged in an accident because her bank had reversed the final payment of the policy premium. The consumer informed her broker about a month before the accident that her banking information had been changed, but her broker did not make the change.

The broker confirmed that he had received the policy changes, but said he had not seen the change in the bank details request. Subsequently, two consecutive premiums were not paid. The consumer said this was only after she claimed the insurer notified her of the two unpaid premiums and the claim was denied.

The broker said that if the insurer had informed him in a timely manner that the premiums had not been paid, he would have notified the consumer. The consumer also said that the insurer has not contacted her about the unpaid premiums. The broker said the insurer was responsible for the consumer’s damages.

Brokers must guarantee the well-being of customers

However, the ombudsman’s office said the nature of the broker’s work requires entrusting the financial well-being of his clients to him.

All other changes communicated to the broker via WhatsApp had been implemented, confirming that the instruction had been received but not executed by the broker. In addition, the consumer instructs a financial service provider and/or its representatives to carry out specific instructions.

This agreement obliges the financial service provider to exercise due care and skill in the execution of the insured’s assignment, as determined in Article 2 of the Code. Despite the insurer’s actions or omissions, the office advised the broker to resolve the consumer’s claim.

The broker ultimately requested all invoices and bank statements relating to the repair of the vehicle from the consumer and paid a sum of R256,800.