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Short-term policyholder concerns, then and now

Events over the past year, both locally and internationally, have shifted the focus on a number of material terms and conditions in policy documents.

Pre- and post-Covid

A media release published in November 2019 by Santam saw the challenging economy as the biggest risk in the country.

“The in-depth body of research showed the biggest concern among corporates and commercial entities in South Africa to be theft, followed by motor vehicle accidents and fire. On the consumer front, the top risks are motor vehicle accidents, burglary and theft.”

The 2020/21 Insurance Barometer shows that the challenging economy, political unrest, the pandemic’s impact on businesses, cybercrime and climate change are among the top risks highlighted by the consumers, intermediaries and corporates polled.

The barometer revealed that consumers are more concerned about crime-related risks compared to other polled groups. Unemployment is also a growing concern. Motor vehicle accidents and burglary were less of a concern in the 2020/21 survey, possibly due to the lockdown.

The struggling South African economy remains the biggest emerging concern for commercial entities.

“The economic downturn has impacted businesses across our specialist lines of insurance. In particular, we’ve seen the marine, heavy haulage, taxis (including e-hailing), aviation, travel and the construction industries contract as a result of the economic challenges,” according to Andrew Coutts, Santam’s head of Intermediated Distribution.

What about 2022?

The proposed premium increases announced by Sasria for certain categories is being heavily debated. It appears their impact was not fully considered.

Santam has just announced some changes to their personal lines policies:

“We made changes to our wordings to improve clarity and reinforce our commitment to treating customers fairly in all circumstances. The following changes take effect from the renewal date of your policy and can be summarised as follows:

“Road Accident Fund and Compensation for Occupational Injuries and Diseases Act: Although the existing policy wordings exclude incidents covered by relevant legislation, further changes under the property, vehicle and watercraft insurance lines are to clarify that, should these statutory compensation schemes fail, no specific cover is provided by the policy. If these entities were to fail, Santam would, at that stage and subject, to regulatory requirements, in all likelihood seek permission to introduce similar cover, subject to the necessary premiums being paid.

“Cyber: Reinsurers are amending their exclusion of cyber event cover in their treaties. In the light of this and the principle that our policies are designed to respond to physical damage, except for a few specified cases, we are providing clarity with regard to cyber losses, where pure data losses and cyber losses are excluded from property and/or assets policies. However, when a cyber-event leads to an otherwise insured listed peril, which then directly results in physical damage (e.g., a fire), the physical damage will be covered, provided the cover is specified to be included in the policy summary. This is despite the fact that the physical damage caused by an insured peril was indirectly caused by a cyber event. The cyber exclusion is now included under the general section’s ‘Not covered by this policy’.

“Medical expenses: Santam provides cover for medical expenses and trauma treatment in certain cases under the property, vehicle, watercraft and casualty insurance lines. The Short-term Insurance Act specifically excludes any services regulated under the Medical Schemes Act. To ensure we are not in breach of this Act, we are changing the cover heading from ‘Medical expenses’ to ‘Emergency expenses’ and clarifying that the cover being provided is for the costs related to emergency expenses following accidental bodily injury as described in your policy, rather than medical expenses specifically. The existing exclusions will, in most cases, still apply.”

This information is published as an introduction to the renewal contract. The question we have to ask ourselves is whether our clients will understand the implications of the changes? Or perhaps, whether we ourselves understand it well enough to explain it to our clients? Bear in mind that there is a legal obligation on us to consider the knowledge and experience of our clients in matters financial when advising them. A short-term contract, as I recall, is a one-year contract, which means a new policy is constructed every year.

Simplified policy wording

In an article last year, we referred to the judgment by the Supreme Court of Appeal (SCA) in the Santam v Ma Afrika case, which highlighted what needed to be done regarding ambiguous policy wordings.

The SCA referred to the Centriq Insurance Company Ltd v Oosthuizen and Another case, where the court held: “[I]nsurance contracts are contracts like any other and must be construed by having regard to their language, context and purpose in what is a unitary exercise. A commercially sensible meaning is to be adopted instead of one that is insensible or at odds with the purpose of the contract.”

In a discussion of this case, George Herbst of Barnard Inc added: “The more complex the construction of the contracts, the greater the chance of internal ambiguity and contradictions. Consequently, the courts are bound to favour the insured and give the benefit of the doubt and confusion to them. Product designers and actuaries who craft these documents may understand them, but in the end, the lawyers and members of the public should be able to comprehend them too.”

This will certainly make the life of the adviser a lot easier, too.

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