Know your product’s exclusionary clauses

Your client advises that she has just bought a new car and wishes to insure it.

Her current vehicle is to be sold, but she would like to keep it covered on her policy until the purchaser has paid in full. She also provides you with the purchaser’s personal details, including the address where the car will be kept, and the purchaser’s identity number.

Do you:

  1. Inform your client that the policy will be updated to include the new information and that she should continue to pay the premiums or
  2. Inform her of the clause in her policy which provides that cover will cease in the event of the vehicle being sold?

If you chose the first option, but neglected to inform the insurer, it would also have come as shock to you to hear that the vehicle was stolen, and the subsequent claim, submitted via you, was rejected.

But wait! That’s not all!

You are now also held liable by the Ombud, and need to refund the client, not only for the loss, but also interest from the time of the theft.

Had the FSP done the right thing by advising the insurer of the client’s request, they would have been informed at the outset that it could not be done.

This is yet another case referred to the FAIS Ombud by the Short-term Ombud. We are seeing an increase in such referrals to ensure that clients are treated fairly.

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