Point of view: Reading insurance fine print will help avoid headaches when claiming

According to the NFO, many consumers of insurance products ignore the fine print which contains crucial details about exclusions. File photo.

According to the NFO, many consumers of insurance products ignore the fine print which contains crucial details about exclusions. File photo.

Published Sep 29, 2024

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Have you ever had an insurance claim declined? I am sure it is one of the most frustrating occurrences. There are ways to prevent your claim from being spurned.

According to the National Financial Ombud Scheme South Africa (NFO), one of the reasons insurance claims are rejected is because the insured failed to understand the details of the policy, especially what is covered and what isn’t.

The NFO describes itself as a single, one-stop, all-in-one dispute resolution service made up of four former long-standing industry ombud schemes: the Ombudsman for Short-Term Insurance, the Ombudsman for Life Insurance; the Credit Ombud and Ombudsman for Banking Services. The NFO’s services are provided free of charge to complainants.

According to the NFO, many consumers of insurance products ignore the fine print which contains crucial details about exclusions; these are situations or events that are not covered by the policy.

“These exclusions help insurers manage risk and keep premiums affordable. To avoid surprises at claim time, consumers are advised to review their insurance policies and update them as needed. It’s always a good idea to discuss any unclear points with your insurer or broker,” it says.

The NFO says the Non-life Insurance Division of the National Financial Ombud Scheme reported that during the 2023 financial year, around 40% of all complaints were generated from motor vehicle insurance with the majority of these complaints involving accident-related claims that had been declined based on an exclusion in the policy.

“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.

“The majority of these claims related to damage caused by acts of nature and declined on the basis of gradual deterioration, lack of maintenance, and wear and tear, followed by defects in design or construction.

“It is, therefore, imperative that you read and understand your policy, even if it is not the most interesting document to read, and make sure that it provides the cover you have requested,” it says.

The NFO says this will help to avoid any disappointments at claim time.

“The best time to familiarise yourself with the terms and conditions of a non-life insurance policy is when you purchase it, or better still before you accept it.

“If your car or home is worth insuring, then it is also worth maintaining it. You need to keep up to date with maintenance and services, as insurers won’t cover any damage caused by wear and tear or a lack of proper care,” the NFO says.

Edite Teixeira-Mckinon, Lead Ombud of the Non-life Insurance Division, says it is also important to ensure that you have insured an item for the correct value because when you successfully claim, your insurer’s liability, generally, cannot exceed the sum insured.

“Prices tend to rise over time, so it’s worth double-checking the replacement value of items every year. Otherwise, you may find that your insurance payout falls short of the amount you expected.

“If you’ve not insured something for the correct value, this could mean that you are underinsured, and the insurer would be entitled to apply average to a claim. This will result in a smaller claim’s settlement than you expected and may result in financial detriment,” she says.

With regard to exclusions, Teixeira-Mckinon says specific behaviours or circumstances which, if found to exist during an incident from which a claim arises, entitle the insurer to reject that claim.

She says a recent example of a motorist who was found to be driving faster than the prescribed speed limit at the time of the accident.

“The driver was found by the insurer to be travelling at a significantly faster speed than the regulated speed limit, triggering the exclusion in the insurance policy regarding driving at a speed more than the speed limit. The insurer relied on this clause and the facts of the case, including speed data, to reject the claim.

“The insured, in turn, contended that he had only accelerated to such a speed to avoid an imminent collision. However, on consideration of the facts of the case, including the road layout at the accident location and speed data just before the accident, it was clear that this version of the events was not supported,” she says.

Teixeira-Mckinon says two lessons emerged from a ruling made in this case dismissing the complaint.

“First, is the importance of reading policy documents and understanding how any specified exclusions can impact the validity of a claim.

“Second, it’s essential that insurance clients tell the truth when claiming because being found to have done otherwise will undermine any claim and may lead to the insurer relying on misrepresentation as another reason to decline a claim,” says Teixeira-Mckinon.

* Maleke is the Personal Finance editor.

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