FAIS Ombud Dismisses Complaint

No need to check the calendar – it’s not 1 April.

On 25 October 2012, the complainant entered into a contract of insurance for comprehensive cover in respect of a vehicle. The insurer was Compass Insurance (Pty) Ltd (Compass), MUA Insurance Acceptances were the underwriting managers and KPC the brokers.

Before applying for cover, the complainant carried out his own research into insurers and underwriters and established that both Compass and MUA had a good reputation and profile and he was satisfied with their service record.

The complainant was involved in an accident on 10 August 2014.

The accident was reported to KPC who assisted the complainant to process a claim with MUA. The insurer’s assessors report indicated that the vehicle was a write-off.

On 10 September, MUA informed the complainant in writing that the claim was rejected as the tyres were worn and were “material to the cause of the loss”.

“We hereby give you notice that your… claim for indemnity under the above policy, between yourself and Auto and General Insurance Company Limited (“Auto and General”) represented by MUA Insurance Acceptance (Pty) Ltd (“MUA”), is rejected…”

The letter also stated that MUA were “underwriting on behalf of Auto and General Insurance Company Limited”.

The complainant was aggrieved as it appeared that MUA changed the insurer from Compass to Auto and General without notifying him. He states that he specifically did not want to have anything to do with Auto and General due to the latter’s “bad record for repudiating claims”. He states in no uncertain terms that if he was informed about the change of insurer, he would not have agreed to contract with Auto and General and would have chosen a different insurer to undertake the risk.

Written representations in this regard were made to MUA.

No response was received and complainant contacted KPC to find out what was happening to his claim. KPC then referred complainant’s representations to a person at a company called Telesure. Again the complainant was perplexed as he had no contract with Telesure. The latter turned out to be part of Auto and General.

Telesure merely confirmed that the rejection will stand.

“We have independently reviewed the merits of the claim and advise that we are in agreement with the decision taken and that the decision is contractually correct.”

A complaint was then laid with the FAIS Ombud.

In response to the complaint, the respondents tendered the following defence:

  1. Notice of change in insurer was given to complainant, by sending a copy via email to the latter’s broker;
  2. Complainant’s broker KPC did not forward this notice to complainant;
  3. Only the insurer was changed; the terms and conditions of the contract remained unchanged;
  4. The condition relied on to reject, namely that the insured vehicle be kept in a roadworthy state, is a condition common to insurance policies within the industry and any other insurer would have similarly rejected the claim;
  5. MUA made the decision to reject the claim, not Auto and General, therefore the change in insurer made no difference to Complainant; and
  6. Even if there was no notice of change in insurer, Complainant’s claim would have been rejected by any other insurer, therefore there is no causal link between the rejection and MUA and/or KPC’s failure to give notification of change in insurer.

The determination concludes:

Under the circumstances, there was a duty on the complainant to demonstrate that Compass would have paid the claim. Complainant failed to demonstrate this and is unable to show any causal connection between his loss and the failure to give notice of change of insurer.

On this basis alone, complainant’s complaint falls to be dismissed.

Whilst the respondents passed the test as far as the complaint is concerned, there were a number of other basic requirements where they failed quite badly, including notification to the client regarding the change of insurer and obtaining the client’s agreement to the change of insurer.

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