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FAIS Ombud on Short-term Insurance Trends

The 2016-2017 Annual report notes the following trends in complaints received from the public.

The number of complaints that relate to short-term insurance policies far exceed those from any other product category of complaints received by the FAIS Ombud, both in the period under review and in previous financial years.

Selling on premium

FSPs still violate provisions of the FAIS Act and the Code by providing the most affordable premium possible, regardless of the implications for the client, who might only in the event of a claim find out what the true cost of the lower premium is. This true cost could include a reduction or exclusion in the cover provided or the numerous additional excesses payable.

Failure to obtain relevant and available information

The term “single need” is used by FSPs as a way to circumvent the requirements of section 8(1) (a-c) of the Code. By claiming that the client requires assistance only for a specific need, such as insurance for his new motor vehicle, FSPs argue that there is no need to obtain all relevant and available information and by extension, no need to conduct a needs analysis for the client.

Semantics

A disconnect exists between the client’s understanding of comprehensive cover and the FSP’s understanding. When a client requests such cover, the expectation is that the entire value of the vehicle (including extras) will be covered in the event of theft or a total loss. For an FSP, comprehensive cover often means that the vehicle is insured for any eventuality up to the retail value of the vehicle, with extras not taken into account. There is a failure to determine whether the vehicle has any extras that would need to be specified. For example, canopies on bakkies are not covered unless specifically noted in the policy.

Financing

FSPs might ask clients whether or not a vehicle is financed but very rarely offer or recommend top-up cover, which often compromises clients if they make a claim in the early stages of the credit agreement.

Homeowners

FSPs tend to fail to disclose to clients the exclusions that exist in terms of their homeowners’ policy. This is especially true for new homeowners who, in the absence of these disclosures, are unable to take any steps to mitigate their losses. It is devastating when, for example, one’s roof collapses during a heavy storm and the claim is rejected for wear and tear.

Content

With insurance on household content there is failure to provide for accidental damage, which is not automatically covered. FSPs also fail to advise clients about items such as jewellery, laptops and cell phones, which should be specified.

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