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Consumer Affairs
Wednesday, August 1, 2007
Honesty the best policy

The Ombudsman for Short-Term Insurance says that consumers have a duty to disclose relevant information and any material changes in circumstances, to their insurers to avoid the possibility of having their claim repudiated or the policy cancelled.

“A large percentage of the matters that come to our offices at the moment arise from an alleged non disclosure of information by the insured to the insurer,” notes Brian Martin, Ombudsman for Short-Term Insurance. The insurer asserts that, had the correct information been furnished, it would not have accepted the risk proposed for, or only on substantially different terms.
Consumers have a duty to disclose information at the time of taking out insurance and again when any change in circumstances occurs, which might affect the risk being insured, such as a change in residential address, or a change in the identity of the regular driver of the vehicle. It is essential that accurate answers be given at the time of proposal and information furnished regarding a person’s financial status including adverse judgments taken and adverse credit postings.
“Honesty and accuracy is without a doubt the best policy,” says Mr Martin. An insurer will take all information into account when it comes to accepting the risk and its willingness to take on the insurance. It might also affect the premium charged. In terms of the Short-Term Insurance Act all information needs to be disclosed that a ‘reasonable person’ would regard as material for the insurer to underwrite the risk properly. “If in doubt about something, rather disclose it,” he advises. The Ombudsman reviews each case on its own merits and applies principles of equity and fairness in reaching a decision.
All disclosures should preferably be made in writing and consumers should keep a copy of the communication. However, some insurers conduct all their business on the phone and these calls are recorded. When making a change to a policy, make a note the time and date of the call, who the insurance representative was, and what changes were requested.
“It is standard practice for an insurer to send an updated schedule or endorsement of the policy to the insured once the changes have been made,” adds Mr Martin. “If consumers make use of an insurance broker, they must make sure they receive an acknowledgement in writing.
“Essentially what we are saying is that consumers need to be proactive in advising their insurer of changes to their lifestyle to avoid possible problems in the future”. If a client is unsure about anything on the policy, consult with a professional such as a broker or attorney, for advice before committing to anything.
The office of the Ombudsman for Short-Term Insurance can be reached on 0860 726 890, by email to: info@osti.co.za or visit www.osti.co.za

Copyright © Insurance Times and Investments® Vol:20.7 1st August, 2007
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