Information provided by the Ombudsman for short term insurance reveals that car insurance policies are frequently disputed by vehicle owners. About 67 percent of complaints registered with the ombudsman in 2007 relate to motor vehicle claims, 12 percent to homeowners insurance and 11 percent to miscellaneous cover issues.
But why do we find so many disputes? Industry experts believe these disputes are mainly attributable to the insured not fully understanding what his or her policy actually covers. Insured car owners often claim that they have not noticed the “fine print” in their contracts or have been misled into signing the policy document. In this Blog post we will investigate the nature of the fine print and offer advice to our policy holders.
What is fine print in a contract?
Fine print is seen as controversial because of its deceptive nature. Even though the exact terms of the agreement is “technically” available to the consumer, it often designed to be overlooked. Consumers are baffled by the technical and insurance jargon typically used in insurance policy handbooks and contracts, and have difficulty to understand these terms in plain English. When some of the content appears to be “hidden” inside the contract, this poses a risk to the consumer.
The unsuspecting customer, who can instantly see the basic aspects of the agreement, will, due to natural impulsive behavior, time constraints, and/or personal need, generally not bother to learn the caveats, instead focusing on the positives of the agreement.
It is important to note that “fine print” in a car insurance policy should not be seen as necessarily being in a smaller “font” or letter type, but it rather refers to a term or fact to be found elsewhere in the contract in an annexure or from a link to another page or sub-clause!
Can we blame the fine print or are policy holders at fault as well?
Policy holders are quick to blame the insurer or broker – but need to accept blame as well! We often neglect to take the time to familiarise ourselves with the content of the contract. Special attention should be given to the following aspects:
- Exclusions — certain insurance companies exclude hail damage to motor vehicles.
- Policy conditions — familiarise yourself with the insured amount on your policy (how much will the insurer pay out in the event of a claim, how many claims will be paid, etc.)
- Definitions — familiarise yourself with these (power outages, for instance, do not form part of the insured peril definition).
- Restrictions of use — in the case of motor vehicle insurance, for example, one must stipulate whether your vehicle is being used for private or business purposes.
- Security/maintenance — understand exactly what security or maintenance measures need to be in place in terms of your home and motor vehicle (failure to do so may result in a claim being repudiated).
- Liability — what protection does your insurance policy offer in terms of, for instance, passengers in your vehicle or people on your property?
- Excesses (First Amount Payable) — determine whether any deductibles, such as excess payments, are applicable as the sum you are insured for may not necessarily be the sum that is paid out.
- Car hire — find out whether this is standard on your policy as it may only be applicable in the event of theft or write-off.
How can we protect the consumer from “fine print”?
With proper education, consumers can be warned to read the fine print and to see the red flags on an offer that is too good to be true. We would like to provide the following advice to our car insurance clients:
- Never jump into signing the pre-printed agreement – the excuse of ignorance and “but I did not know what I was signing” might not be accepted.
- Find out what the insurance terms in your contract mean before you choose an insurance provider.
- Know exactly what you are getting into and what you can expect to get out before you sign the contract.
- Read all terms and exclusions thoroughly before signing.
- Ask questions to your insurer – and request the reply or confirmation in writing.
- Ask about possible scenarios – What if this happens..? What if that happens?
- Remember that you have 30 days to cancel the policy if you are not satisfied with its terms and conditions, including any exclusions you might not have been told about.
- It is NEVER too late to gain clarity – the contract can at any time be clarified and amended, and if you are not happy with the new terms, you can always opt for another insurer willing to provide this!
We will in a next Blog discuss the protection provided to the policy holder by legislation.