• Sharebar
Short term Insurance
Sunday, July 1, 2007
Yes and no

The question of being ‘blacklisted’ by the insurance industry is certainly controversial. And while short-term companies say such a list does not exist, it is true that certain clients become uninsurable for a variety of reasons.

Steve Zietsman, Head of Marketing and Communication at Santam, says short-term insurance companies have a duty to manage their risks prudently and properly in order to keep their insurance premiums at an affordable level, in the interest of its clients.
In doing so, they have to deal with three matters:
• People exposed to unacceptably high risks;
• People who are “moral risks”. This is where a fraudulent activity was identified in a person’s dealing with a specific company, either in underwriting or through the submission of a false claim; and,
• Duplicate claims being submitted to more than one company (fraudulent claims).

It is not uncommon that an insurance company’s exposure to risk becomes unacceptably high due to either the failure or the inability of a given policyholder to keep risks within reasonable limits. “When this happens we sometimes find it necessary to cancel such a policy, in which case the company is no longer prepared to extend the particular insurance cover to that client, given his circumstances.”
But the common perception that people who have had their policies cancelled are placed on a blacklist that is shared among other companies is altogether wrong. “What is true, though,” he says, “is that any client has to disclose such information, should he be asked by another company whether he has previously had insurance cover terminated because of unacceptable risks.
“It is then up to the other company to decide whether it was happy to accept such risk, and at what price.”
So in a sense, the client blacklists himself.
Certainly an insurer can, and does exclude policyholders from its books. This can occur in cases where it becomes clear that its exposure to risk becomes unacceptably high due to failure or the inability of a policyholder to keep risks within reasonable limits.
“When this happens we sometimes find it necessary to cancel such a policy, in which case the client automatically becomes uninsurable,” he notes.
“For example, if a policyholder experiences a legitimate house burglary but it is suspected he has ‘padded’ the claim, he becomes a ‘moral risk’. His premiums will go up, he will lose his no-claims bonus and, should suspect claims continue he will receive warnings of the repercussions after which he could become uninsurable.
“Similarly, if a person has retained a policy with us for 50 years with minimal claims, but at the age of 70 becomes involved in two accidents every month, we will still initially pay out; but if it becomes apparent that this person is now too high a risk – that he shouldn’t be on the road – then we might cancel his insurance.”
And suppose a person lives in an area with high water levels resulting in frequent flooding of his home, or in a high crime area against which he is unable to provide sufficient security. In this case he could become a ‘geographical risk’ and thus lose his insurance.”
However, in the last case, by the same token, if the client should move to a safer suburb where flooding or robbery was less likely to occur, he would once again be able to obtain insurance.
“We constantly remind policyholders to take all precautions and care to prevent or minimise loss or damage to their possessions. If it is clear that this is not happening then it would simply not make commercial sense for us to continue paying out claims that ultimately push up premiums for everyone else.”
Mr Zietsman adds that even if a claimant had an excellent track record but then there was a sudden spate of claims, whether petty or large, it might indicate recklessness on the part of the policyholder. “This would automatically ring alarm bells and we would investigate and perhaps cancel the policy if it was found to be the case.
“We have an obligation to share claims information with other insurers in the industry.” This is through a central database, which is intended to prevent dishonest clients from moving between companies unnoticed, and for example submitting duplicated claims. And this also guards the honest client against facing heavy premium increases to cover such activity.”
If you work through a broker he will automatically take up an unjust cancellation with the insurer concerned. However, where the client deals direct he still has the right to put his case before his insurer directly or, alternatively, to contact the Insurance Ombudsman on 0860 726 890.
This office provides an impartial mechanism through which the industry ensures policyholders receive fair treatment and service, and it provides a fast-acting, readily available port of call for disputes relating to claims without incurring costly legal fees.

Copyright © Insurance Times and Investments® Vol:20.6 1st July, 2007
920 views, page last viewed on January 15, 2020