The Policyholder Protection Rules require insurers to ensure that policyholders are made aware of the existence of the time-limitation clause, as well as the implications thereof. This protects policyholders from being prejudiced by clauses which they previously would not have been made aware of or did not fully understand. In addition, it provides the policyholder with the opportunity to dispute rejected claims and follow the correct processes in order to have their claims reconsidered.
In a recent publication, the Ombudsman for Short Term Insurance (OSTI) urged policyholders to pay particular attention to the time bar provisions contained in their insurance policies. “Do not wait too long before seeking assistance. Most policies contain clauses that limit the time that a consumer has to challenge an insurer’s decision on a claim,”
The case at hand
On 14 November 2016 Mrs H lodged a claim with her insurer for lighting damage to her household items. However, the insurer informed the insured about the rejection of the claim on 17 November 2016, on the basis that the damage was not caused by an insured peril and that the loss did not fall within the benefits provided by the policy.
The insured was not happy with the insurer’s decision and escalated the matter internally with the insurer. The insurer stood by its original rejection of the claim and advised Mrs H on 16 August 2017 that the matter was closed.
Mrs H applied to OSTI for assistance on 10 September 2019, more than two years after the outcome of the internal dispute with the insurer was communicated to her.
Based on OSTI’s query with the insurer, the insurer referred to the policy terms and conditions which specifically set out the timeframe within which to dispute the outcome of the claim. The insurer also submitted that the rejection letter sent to Mrs H detailed the procedure to be followed if Mrs H was not satisfied with the outcome of her claim.
OSTI’s Terms of Reference
OSTI’s jurisdiction is limited concerning time-barred complaints. Clause 4 of OSTI’s Terms of Reference states:
“4. The Jurisdiction of the Ombudsman
4.1 The Ombudsman shall only consider a complaint made to him if he is satisfied that:
4.1.7 the complaint has not become prescribed in terms of the Prescription Act, 1969 or any enforceable time bar provisions contained in the Policy, provided that in relation to any enforceable time-bar provisions in the policy
18.104.22.168 the Ombudsman shall have the power to condone non-compliance therewith upon good cause shown, and
22.214.171.124 the provisions of any enactment which provides for the extension of any period contained in such time-bar provision shall be given effect to.”
Clause 4 of OSTI’s Terms of Reference grants OSTI the power to condone non-compliance with a time bar provision in an insurance policy if the consumer can provide good cause for the late filing of the application for assistance.
When Mrs H approached OSTI, the time frame within which Mrs H had to challenge the insurer’s decision had expired and the complaint was time-barred.
Although OSTI requested Mrs H to provide reasons for the late submission of the complaint, she failed to respond to OSTI. Therefore, Mrs H failed to show good cause for her noncompliance with the time bar provision in the policy and, as a result, OSTI could not condone the late filing of Mrs H’s complaint.
“The complaint fell outside of OSTI’s jurisdiction and could not be considered. No decision could be made about the merits of Mrs H’s complaint.”
It is important to highlight the following to your clients in order to facilitate the complaints
process and to better substantiate their OSTI case:
- Do not wait too long before seeking assistance. Most policies contain clauses that limit the time that a consumer has to challenge an insurer’s decision on a claim.
- Provide honest and detailed information when lodging a complaint.
- Timeously respond to requests for information.
- Provide evidence to substantiate the submissions made.
Click here to download the OSTI case study.