Insurers do not always respond in a responsible manner when they first get a complaint and, over the years, I have taken about a dozen cases to the ombud. The outcome was favourable in each instance.
Here are some of my recent fights.
A Burst Water Pipe
An underground pipe at one of my properties sprang a leak, and I only became aware that something was amiss when the water bill arrived. It was R40 000. A claim was sent to my insurer, who argued that they would only repair the pipe and pay R1 600 of the R2 600 repair bill. They absolutely refused to pay for the water. Insurance companies are meant to put you back in the position you were in before the claim. I therefore felt that this was unfair, and took the assurer to the ombud.
Once they realised I was challenging their initial assessment of my claim, they made a counter offer and agreed to pay R10 000 towards the water account. By challenging their decision, a new precedent had been set. Which means that anyone with a similar problem can also appeal. I then had a choice of either appealing their amended decision, which would mean a resolution wouldn’t be reached for at least six more months, or accept their offer of R10 000.
I also went to the city council and presented them with photographs, as well as evidence proving I was unaware of the leak. They agreed to reduce the bill by fifty percent. After lots of back and forth, the amount I was expected to pay dropped from R40 000 to R10 000. As the unrecovered amount can be offset against my income, and SARS will give me a refund, my losses were minimal.
Treating Customers Fairly
- An insurance broker was asked to process a cash withdrawal from a preserved provident fund. However, he failed to warn the client that there would be tax payable of around R180 000, and that this would be released directly to SARS. He also failed to mention that only one withdrawal was permitted. When the client realised that no further funds could be accessed, they contacted us and explained the situation. We went to the ombud, who ordered the company that had dealt with the withdrawal, to compensate the client to the tune of R180 000.
- In Knysna a number of houses affected by the recent fires were under-insured. Brokers who had sold these policies over the telephone had failed to warn the homeowners about being under-insured. Some of the residents lost their entire house as well as its contents. They now have to clear the site, get new plans drawn up, secure the building site and find alternative accommodation while their homes are being rebuilt. Many have found that their insurance payment is only enough to fund having new foundations laid.
In this instance, who is responsible? The brokers who did not properly advise their clients, or the insurers? Some brokers are going to have sleepless nights.
For this reason, it is not a good idea to focus solely on the monthly premiums when buying short term cover. You should also look at how comprehensive your plan is, and the benefits you are paying for.
A Deceased Estate
When a client of mine passed away, her estate was in the region of R4 000 000. This was held mostly in shares and unit trust investments. Her husband was her sole beneficiary. The attorney dealing with her estate wanted to sell everything and pay her husband the cash.
Rather than giving him the cash, the second option was to transfer her investments to the beneficiary’s name, making him the new policy holder. Option two would also reduce Capital Gains Tax in the estate, as well as the administrative costs. After this was made clear, they went with option two and her spouse received nearly R200 000 more from her estate than he would have if everything had been cashed in and sold.
Often we only become aware of a problematic situation after the fact. This is when having someone in your corner, that can help you take action, is invaluable. In our next newsletter we look at why a financial plan is necessary. While it won’t prevent unforeseen situations from arising, it will help you manage the risk that comes with it.