Sound financial advice could have kept this mess out of the courtroom

The importance of open two way communication between an insurance company and its clients has been placed under the spotlight following a 20 March 2013 Pietermaritzburg High Court ruling in favour of Outsurance Insurance Company Limited.

 

The Court upheld the direct insurer’s decision to repudiate a claim for R609 000 for accident damage to an Audi R8 Quattro on the grounds that the insured, Sherwin Jerrier, had failed to notify Outsurance of two previous accident events.

 

Jerrier self-funded R15 000 for a wheel replacement in April 2008 and a further R200 000 in accident damages in April 2009, but in each case chose not to lodge a claim nor report the incident to his insurer.

 

The Financial Intermediaries Association of Southern Africa (FIA) has watched the media coverage of the Court ruling with interest. “We take notice of this case – which delves into the insurance concepts of materiality and disclosure – and again highlights the importance of contracting for insurance with the assistance of an intermediary,” says Barry Taylor, Chair of the Short Term Insurance Executive Committee of the FIA.

 

“Insurance brokers are an essential link in the communications process between consumers and insurers and possess the necessary skill and experience to advise consumers to disclose events that may have an impact on their insurance premium, whether from a claims history perspective or due to increased moral risk”.

 

“The events following on from the Court decision indicates how quickly damage can be done to the image and reputation of the short term insurance industry,” says Taylor. “National Treasury has already indicated its desire to meet with the South African Insurance Association (SAIA) to ensure that the Court decision would not negatively impact on other insurance clients.

 

“Although Treasury’s concerns are valid we should not lose sight of the fact that the domestic short term insurance industry protects the personal assets – motor vehicles and household contents – of millions of insured South Africans”.

 

Taylor warns that the material non-disclosure finding of the High Court should not be misrepresented as an injustice to consumers. “All insurance consumers should learn a positive lesson from this case,” he says. “To be fully informed about the Do’s and Do Not’s of insurance you need a registered and qualified intermediary”.

 

You should discuss accident or damage events involving your insured property with your insurance advisor whether you decide to claim or not – and no matter how insignificant you believe the incident to be. Your intermediary will be able to advise you on appropriate action, including notifying the insurer.

 

“More importantly, you should always transact for insurance with the assistance of an independent financial intermediary,” concludes Taylor. “You do not appreciate the value of good advice until disaster strikes”.