The National Financial Ombud Scheme (NFO) last week released its first annual report, which covered the 10 months from its recognition as an industry ombud scheme on 1 March last year.
The NFO consists of four divisions: Banking, Credit, Life Insurance, and Non-life Insurance, which used to be called the Ombudsman for Short-term Insurance (OSTI) before it and three other industry ombud schemes amalgamated as the NFO.
Of the 18 903 cases opened by the NFO between 1 March and 31 December 2024, 59% (11 217) were opened by the Non-life Insurance Division, which closed 9 289 cases over those 10 months.
For the first time in three years, the Division experienced a decline in complaints last year, by 11% compared with 2023, said Edite Teixeira-Mckinon, the Lead Ombud: Non-life Insurance.
The Division’s intervention resulted in a monetary benefit of R94 164 430 for consumers over the 10 months and R107 436 340 over the full year, compared with R102 800 000 in 2023.
Teixeira-Mckinon said this figure is the rand value of what the Division could actually quantify in terms of claims or premiums refunded. Either there were payments made to insureds, or they received, for example, vehicle repairs that were authorised by the insurer to that value, or repairs to homes, or cellphones replaced, she told Moonstone this week.
Decrease in motor vehicle complaints since Covid
As expected, complaints related to motor vehicle insurance accounted for 42% of all the complaints finalised or resolved by the Non-life Division during the year. This was followed by:
- homeowners’ insurance complaints at 27%;
- commercial insurance complaints at 14%;
- household contents complaints at 6%; and
- other types of insurance and non-claim-related complaints at 11%.
Motor vehicle insurance complaints resolved during 2024 decreased by 2%, homeowners’ complaints increased by 2%, and commercial complaints increased by 2%. Other insurance and non-claim-related complaints, combined, increased by about 3%, while household contents remained consistent with the previous year’s trend, Teixeira-Mckinon stated in the annual report.
Complaints related to motor vehicle insurance have decreased significantly since the lockdowns, before which they comprised almost 60% of complaints, Teixeira-Mckinon told Moonstone. Although many employees have returned to the office, hybrid working arrangements have not gone away, contributing to fewer motor vehicle claims, and therefore fewer complaints.
Changes to jurisdictional limits
On the other hand, the Division has seen an increase in homeowners’ insurance complaints related to weather-related claims and, more recently, in commercial insurance complaints.
The Rules governing the NFO removed the previous limits on the OSTI’s jurisdiction when it came to commercial insurance complaints. The OSTI’s jurisdiction extended to commercial insurance where the business’s turnover was less than R25 million in the previous financial year. This turnover limit no longer applies.
The Division’s jurisdiction is, however, limited by the value of the claim: R5m relating to all types of cover, excluding homeowners’ or buildings cover, where the limit is R10m.
“Even on the claim limit, an insured can agree to abandon part of the claim to bring it within our jurisdiction […] or a participant can agree to our jurisdiction. There are many participants who say, it’s fine, we know it’s over your limit, but we’d rather you deal with it than us having to battle this out in court,” said Teixeira-Mckinon.
She said there also no longer “self-imposed limitations” on the Division’s commercial jurisdiction. “We used to, for example, not look at aviation and marine complaints, but that has gone away. We’re required to look at anything that falls within the commercial space – anything that’s non-life.”
Motor vehicle insurance
Most complaints concerning motor insurance related to claims for accidents, at 62%, followed by warranty and mechanical breakdown claims, at 18%, and theft and hijack claims, at 9%, Teixeira-Mckinon stated in the report.
Compared to 2023, there was a decrease of about 2% in accident-related motor complaints, and an increase of 4% in warranty and mechanical breakdown-related complaints.
Theft- and hijack-related complaints were consistent with those in 2023.
The main reason for motor insurance complaints was the rejection of the claim based on an exclusion in the policy. The leading exclusion was the failure to prevent or minimise loss or damage, also known as a lack of due care, or recklessness. These rejections increased by 11% compared to 2023.
Other reasons for complaints were disputes over the claim amount, delays in processing claims, dissatisfaction with the repairs carried out by insurer-appointed service providers, and the non-payment of premiums.
Complaints about delays and dissatisfaction with repairs featured for the first time as prominent trends, said Teixeira-Mckinon
Disputes related to the non-payment of premiums increased by 5% in 2024, while quantum disputes remained consistent with the trend in 2023.
Homeowners’ insurance
The highest number of homeowners’ insurance complaints finalised during the year related to claims for loss or damage because of acts of nature, at 40%. In 2023, these complaints were at 45%. This was followed by the bursting of water apparatus, at 16%, and theft and burglary, at 8%.
Compared to 2023, there was an increase of about 1% in theft and burglary complaints, but the other trends remained consistent, said Teixeira-Mckinon.
The primary cause for complaints was the rejection of claims based on gradual deterioration, lack of maintenance, or wear and tear. This was followed by no insured peril and defective design, construction, or materials.
Another key cause for disputes related to the quantum of the claim.
Gradual deterioration, lack of maintenance, or wear and tear remained the highest rejection reason in this insurance category, which was also the case in 2023 and increased by 7% compared to 2023.
No insured peril increased by 10%, and quantum disputes increased by 4%.
Complaints that dealt with the rejection reason of defective design, construction or materials and construction decreased by 17%.
Commercial insurance
The highest number of commercial insurance complaints resolved related to motor vehicle claims, at 22%. This was followed by buildings combined (22%), theft (13%), and electronic equipment (5%).
Compared with 2023, motor vehicle-related complaints increased by 1%, buildings combined increased by 1%, and theft also by 1%. Electronic equipment made its first appearance among the most prevalent complaints under this category of insurance, said Teixeira-Mckinon.
The main reason for complaints under this category of insurance was claims rejected because of an exclusion in the policy, primarily the exclusion of gradual deterioration, lack of maintenance, or wear and tear, followed by no insured peril operated, and quantum disputes.
Disputes related to gradual deterioration, lack of maintenance, or wear and tear increased by about 6% from 2023.
There was a notable increase of about 90% in complaints related to the policy provision of no insured peril operated compared to 2023. Quantum disputes remained consistent with the trend in 2023.
Household contents insurance
Under household contents insurance disputes, the highest number of complaints closed related to claims for theft and burglary, at 33%. This was followed by accidental damage, at 25%, power surge, at 21%, and acts of nature, at 9%.
Accidental damage complaints increased by 5% compared with 2023.
Power surge complaints were at 24% in 2023, representing a 3% decrease in 2024. This was the second consecutive year that power surge-related complaints have decreased following several years of increases in these types of complaints, said Teixeira-Mckinon.
Theft and burglary complaints decreased by about 1% and acts of nature decreased by 1%.
The primary cause for complaints under this category was claims rejected based on a policy exclusion, with the main exclusion being gradual deterioration, lack of maintenance, or wear and tear. In 2023, this exclusion was also predominant.
This was followed by no insured event operated, quantum disputes, and criteria for the insured event not met.
Teixeira-Mckinon said there was a notable increase of 18% in gradual deterioration, lack of maintenance, and wear-and-tear disputes.
No insured peril increased by 8%, while quantum disputes and criteria for the insured event not met remained consistent with 2023’s trends.
Other and non-claim-related disputes
The highest number of complaints related to claims for theft/robbery of mobile devices, at 31%, whereas in 2023, the figure was 32%, said Teixeira-Mckinon. This was followed by legal expenses (16%), non-claim-related policy complaints (15%), gap medical (10%), and accidental damage to mobile devices (9%).
Compared to 2023, complaints related to accidental damage to mobile devices decreased by 2% and gap medical increased by 1%, while legal expenses increased by about 4%.
The primary cause of disputes under this category related to claims rejected on the basis of the non-payment of premiums and criteria for the insured event not met.
Other predominant causes for complaints were quantum disputes and the cancellation of policies. Disputes about the non-payment of premiums increased by 10% compared to 2023.
Quantum disputes remained consistent compared to 2023, but disputes related to the cancellation and lapsing of policies increased by 11% compared to 2023, said Teixeira-Mckinon.
