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Consumers rue declined claims - report

May 10 2017 17:31
Lameez Omarjee

Johannesburg – Claims declined over non-disclosure of information by clients have been slowly growing, statistics reveal.

The long-term insurance ombudsman’s annual report for 2016, released on Wednesday shows the number and nature of complaints received for the year, as well as those which have been wholly or partially resolved.

Among the trends observed include the “slow creeping up” of the non-disclosure complaints from 160 to 177 in 2016. Of these, the number of claims resolved increased from 4.58% to 5.32% in 2016. “This may mean insurers are more vigilant or people are not disclosing as they did in the past,” explained deputy ombudsman Jennifer Preiss.

Preiss explained that when applying for a policy, clients expected to disclose information, which may be medical or financial in nature. At a later stage when the client claims, the insurer relies on the fact that he or she did not disclose as a “reasonable” client would have.

The most (1 644) complaints received were for claims declined over policy terms and conditions not being recognised or met. Of these 49.46% were either wholly or partially resolved.

This is followed by 1022 complaints related to poor communications or documents or information not supplied and or poor service. Of these 30.75% were resolved.

Among other trends observed include a drop in health complaints for a third year in a row, explained Preiss. These claims were related to the hospital cash plans which are beginning to reduce. These complaints came down from 506 in 2015 to 373 in 2016. “There are fewer health complaints, it’s something we are pleased about,” said Preiss.

There has also been a slow increase in the number of disability complaints. These are “still quite low” said Preiss. The report showed that these increased from 356 to 368. “When times are tough financially, we see more people submitting disability claims,” she added.

Complaints related to misspelling are also shrinking. These complaints are being directed to the Financial Advisory and Intermediary Services (FAIS) ombud, explained Preiss. These complaints have to do with “inappropriate advice” or misspelling of advice to clients. The six complaints being handled by the long-term insurance ombud now are hanging over from 2004, she explained. This category will disappear in future as the FAIS ombud takes over handling these complaints.

Other findings show that 9871 written requests were received by the long-term insurance ombud during 2016. Of these 5284 were chargeable, this is 266 more than the previous year. A total of 3324 cases were resolved. About 78% of these were finalized in six months, said ombudsman Judge Ron McLaren. This is an improvement since 2014, where 74% of cases were finalized and in 2015 (75%).

A total of R187.7m was recovered on behalf of complainants. Compensation for poor service amounted to R487 335. The office spent R21.5m on cases, the cost for a standard case came to R3650.

The percentage of cases wholly or partially resolved was 28.1%. Taking into account cases transferred to insurers, in instances where complaints were received by the ombud first, the total percentage of resolved cases is at 37.4%, the report showed.

On average 78% of cases were resolved in six months. However complicated complaints which included factual and legal complexity, explained McLaren.  These generally take more than a year to resolve.

Ombud concerns

The report reflected that case finalisation has become more challenging.

The office is showing growing concern over bad bargains or deals, where products do not provide value for money or deliver on perceived promises, the report shows. There are also complex products which impact finalisation. A total of 598 cased had to be reallocated due to their complexity, explained the report.

The complainant’s behaviour is also a concern to the office. “This occurs when the behaviour of a complainant takes on unreasonable dimensions,” said McLaren.  “The persistence of complainants impacts on our productivity as more time has to be spent on such complainants,” he explained.

Similarly, insurer behaviour also impacts the office. “Insurer behaviour sometimes suggests a claim is being avoided at all costs,” he explained. “This is where the insurer is demonstrably looking for reasons not to pay what appears to be a valid claim, often by raising a new defence if the original reason for declining the claim does not succeed.”

Some insurers have also displayed “poor handling” of claims, and poor underwriting practices, according to McLaren. Systemic issues arising from the far-reaching impact of some complaints which require the involvement of other policies also extend the finalisation process. 

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