Do you understand your car insurance policy and the terms and conditions? Are you aware of those aspects referred to as “exclusions”? Those are in basic terms the conditions for which you do not have cover – or at the occurrence of which no cover and payment will be provided.
We would like to share insights shared by Neesa Moodley-isaacs in a story appearing in Personal Finance and titled “Car insurance client should have been told about exclusions – ombud”
This story features a recent decision by the Ombudsman pertaining a car insurance client and the need to be informed of exclusions.
Background information
At the time that you purchase car insurance both the insurer and the insured clients has specific rights and obligations. Amongst these are the obligations to make full and complete disclosures. A car insurance is an agreements between 2 parties sometimes in law described as a “meeting of the minds”. It is important that both parties clearly understand what they are agreeing to -which would be the agreement as stipulated in the policy contract.
Just as the client has to disclose his personal details and details pertaining to his driving/ accident record etc, the insurer has to disclose in which circumstances cover would not be provided – which are these “exclusions”.
We would like to explain this with reference to the facts and decision by the Ombudsman
Facts
On June 30, 2008, Alta Clarence of Gauteng took out insurance for her car, a Hafei Lobo. (Hafei Motor is a Chinese car maker.) The insurer was Constantia Insurance, but the transaction was concluded telephonically with Bestsure Financial Services, represented by Leandra Liebenberg.
On November 8, 2008, Clarence’s 19-year-old daughter was involved in an accident while driving the Hafei Lobo.
Clarence submitted a claim to Constantia Insurance, but was told that her claim had been rejected because she was not covered if the driver was under 23.
Complaint to the Ombudsman
In her complaint to Noluntu Bam, the Ombud for Financial Services Providers, Clarence said she had not been made aware of the exclusion when she took out the policy. If the exclusion had been drawn to her attention, Clarence said she would not have taken out the policy.
“Regular driver” conditions not explained
In her investigation, Bam found that Clarence had not been advised of any exclusions when the policy was sold to her, and she was asked only to read the “wording of the policy” in a letter dated July 14, 2008, two weeks later.
Records of the telephone conversation show that Liebenberg asked Clarence to “name the regular drivers”, and Clarence replied “Mr and Mrs Clarence”.
Liebenberg did not explain what a regular driver was. If a policy is underwritten on a regular-driver basis, people other than the regular driver will be covered, provided they have a valid driver’s licence. They will be secondary drivers of the vehicle.
Bestsure Financial Services told Bam that Clarence had not disclosed that her children would be driving the car and that, if she had, Liebenberg would have informed her of the exclusion relating to the age of the driver.
Ruling by the Ombud
In her ruling, Bam says: “The nature of this exclusion is such that it could easily place (Clarence) at risk. A lay person is not expected to assume that there may be exclusions, and the Financial Advisory and Intermediary Services Act places a clear duty on service providers to draw their client’s attention to such exclusions.”
The ombud ordered Bestsure Financial Services to pay Clarence R75 011 plus interest of 15.5 percent calculated from seven days after the ruling to the date of final payment.
Conclusion and Advice
We would like to urge both consumers and car insurers to pay close attention to the terms and conditions of the car insurance policy. Very few consumers have a clear grasp of financial jargon – and often there is knowledge than only falls within the domain of one party. This needs to be explained and disclosed to the other party to avoid disputes during the claims
Terms and Conditions of Car Insurance