By: Dr Gerrit Sandrock, FCII, is a Chartered Insurance Practitioner
There is clearly no basis for the assumption in some quarters that the South African short-term insurance industry are serial offenders in treating their customers unfairly. In the overwhelming majority of cases, South African insurers deliver what their customers have paid for, and to a very high standard to boot, pumping as they do around R1,5 billion into the economy every single month of the year.
This is the unspoken and unreported finding of the annual report of the Ombudsman for Short-Term Insurance (OSTI). One is left wondering whether it is still necessary, therefore, for the government to be at all in the business of regulating the delivery of service in short-term insurance through programs like the “Treating Customers Fairly” as well as determining how policies are to be worded and sold.
The OSTI acts as a dispute resolution mechanism for buyers of short-term insurance when they feel aggrieved by the service they have received from their insurer. The OSTI intervenes in cases that are lodged with it as an impartial arbiter operating an alternative dispute resolution process. While one would hope that the functioning of the OSTI is as an unbiased mediator, it is clear from its annual report that these days it views itself as a consumer advocate. The annual report specifically states that the protection of “vulnerable consumers” is a particular focus. This is part of a long-standing erroneous view that short-term insurers are terrible at servicing their customers and that they have a reputation of being largely unfair in their treatment of claimants.
But how true is this actually? The OSTI’s own published figures tell an entirely different story – one that seldom gets the publicity that it deserves and illustrates just how much the South African insurance industry is to be praised for its role in sustaining our economy and the lives of those who act in it.
According to the OSTI’s latest report, South African short-term insurers received 4,852,779 claims in the year under review. Of these claims, just 10,044 were referred to the OSTI by claimants who felt aggrieved. That is barely two unhappy persons for every thousand claims submitted, meaning that just 0.2% of claimants felt hard done by. This figure has also been reported to be in a generally declining trend. The OSTI therefore is not called to be involved in 99.8% of claims finalised by insurers.
Of 8,553 complaints finalised by the Ombudsman last year, around 15,6% (1,329) were finalised with some benefit for the insured. This means that in no less than 84.4% of complaints, the Ombudsman could find no fault with the insurer’s decision. This “overturn” rate is now around half of what it was a few short years ago. This too is the reason for celebration, and for the industry to receive kudos from regulators and the public alike.
For just 15.6% of complaints to have been found to be “wholly or partly” correct, and for complaints to represent just 0,2% of all claims, means that insurers got their claims decisions wrong just 0,0312% of the time. Put differently, it means that SA insurers get their claims decisions right around 99,9688% of the time. On this basis, this achievement is another improvement in a steady trend over previous years of assessment. Indeed, it is among the best in the world.
Why do we hear so little of these facts? It is baffling that insurers themselves don’t make more of their success and allow their reputations to be sullied by often unproven hearsay “evidence”.
The question must also be asked: Is this “free” public service still worth it? The OSTI is fully financed by insurers and therefore indirectly by all short-term insurance policyholders, now to the tune of some R50,8 million per annum. This means that millions of South African policyholders spent that sum to gain an advantage of only R109,4 million for a relative handful of policyholders (1,329) who were “wholly or partly” recompensed.