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Trends in Motor Insurance







At the launch of the 2016 Annual Report from the Short-term Ombud, she elected to deviate slightly from the usual statistical analysis to highlight some interesting trends from the report with particular reference to motor insurance.

Motor makes up the majority of the matters that our office deals with, comprising 49% of the formal complaints investigated by our office and accounting for 60% of the Rand value recovered by OSTI on behalf of consumers.

Technological advancements and the ever increasing impact of social media and the big brother syndrome have had a significant impact on the way in which the insurance industry operates. Consumers who may in the past have succeeded in taking a chance or presenting “alternative facts” to insurance companies are often caught out by comments made on social media platforms that contradict information that was given to their insurance company at the time that a policy was taken out.

A common illustration of this – and one that is all too familiar to our office – is alternative fact information given about who the regular driver of a vehicle will be. Older drivers pay significantly lower premiums than younger drivers. The difference in premium can be significant. Certainly significant enough to encourage consumers to provide inaccurate information about who the regular driver of a vehicle will be. Our office sees far too many claims being submitted where, for example, parents have represented that they will be the regular driver of a vehicle when, in fact, the vehicle was purchased by them for use by their child. Paying the lower premium is all well and good until a loss is suffered. Simple desk-top investigations using Facebook or other social media searches can all too easily reveal misrepresentations made by consumers who forget to cover their tracks when making misrepresentations to their insurance companies.

However, as effectively as insurers are at making use of technological advancements during claims assessment stage, OSTI believes that more inroads should be made by insurers into using technology and available information during sales stage.

In this regard I am referring to underwriting information that could be easily accessible to insurers through database sharing or information pooling rather than obtaining it from consumers during sales conversations. For example, claims history or years of uninterrupted insurance.

OSTI sees a large number of complaints submitted where information relating to previous claims is asked by the sales consultant during the sales call and inaccurate or incorrect information is given simply because an insured could not accurately recall her previous claims history.

In modern times where information is available by reference to a database, there should be no need to leave the accuracy of such disclosure to the vagaries of human recollection.

Of course, that is not to say that consumers should not be held accountable for telling lies or making misrepresentations. And of course the industry remains cautious and must be vigilant because of the high incidences of consumer fraud that exist in the market.

In my year in office I learnt a lot about the high levels of creativity behind opportunistic insureds looking to make a quick buck from the insurance industry. The types of suspicious claims that cross the desks of OSTI’s ombudsmen are too numerous to mention. However, a disproportionate number of so-called paper vehicle claims come to OSTI’s office. A paper vehicle is one that does not actually exist, other than on paper. Insurance is taken out for the non-existent vehicle using fraudulent registration papers. A theft of the vehicle is then reported in an effort to receive a cash pay-out for the non-existent vehicle.

It is in an effort to avoid claims of this nature that many insurers require vehicles to be inspected before insurance kicks in.

Source: Paul Kruger: Moonstone Compliance (Pty) Ltd
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