We have previously commented on the Blog on the need for keep records of all the insurance correspondence. This was addressed in a Blog Post titled “Do you keep your car insurance policy documentation in a safe place?” This however also implies that the client does in fact receive the policy documentation from the insurer…
What if the client asks for the documentation and the insurer neglects to provide this?
This scenario was analyzed in detail in a Ruling by the Ombudsman for Short Term Insurance.
On 2nd May 2003, the Insured purchased a Toyota Corolla and Comprehensive Insurance was arranged by the sales person employed by Imperial Motors. In confirmation of the cover, a schedule titled “Toyota Comprehensive Insurance Schedule” which was underwritten by a registered Insurer in terms of the Insurance Act of 1998 was handed to the Insured. Almost a year later, a claim was submitted for damages sustained in a collision. The claim was admitted by the Insurer, which advised that an Excess of R7 250.00 was applicable as set out in the Policy wording.
The Insured did not receive a Policy wording despite repeated requests. The Insurer was unable to show from its records that a Policy wording had in fact been sent out, which would have alerted the Insured to the Excesses payable in the event of a claim. The Insurer was also not able to demonstrate that the Excesses were drawn to the Insured’s attention and merely relied on the fact that the Policy clearly showed the applicable Excesses.
Ruling by the Ombudsman:
The ruling was made taking account of the following facts:
- Despite repeated requests, the Insured was not placed in possession of a fully claused Policy wording showing the applicable Excesses.
- The Insured was not given the opportunity of either accepting or rejecting the terms of the Policy, as these were not explained at the time of the taking out of the Policy.
- It is probable that a lower Excess would have been applicable had the Insured been given the opportunity of sourcing a Policy with some other Insurer on better terms.
The Insurer did not concede and stated that the full Excess as per its Policy be paid. The Ombudsman exercised his rights in accordance with the principle of equity and ruled that the Excess be reduced to 5% of the claim, resulting in a decrease of the Excess by R5 200.
Commentary on the Ruling:
The ruling was made based on the facts presented to the Ombudsman. The excess amounts were found to be excessive (ie an exorbitant amount) and unusual (as compared to excesses normally applied in the insurance industry) as the amount was based on a percentage of the Sum Insured rather than as a percentage of the amount claimed or a fixed excess amount. The Insurer couldn’t prove to the Ombudsman that the Insured was informed of the excess amount applicable and therefore a ruling was made.
This Ruling confirms the need for effective administration by the Insurer. Insurers have an obligation to disclose all the wording, terms and conditions of policies to their insured clients. Failure to do so may prove to be costly!!