Complex insurance, disability claims worry Ombud
- Posted by Roger Hendricks
- On 01/13/2016
- 0 Comments
It is of concern that there are still some long-term insurers in SA who do not understand the importance of handling complaints well, according to Jennifer Peiss, the Deputy Ombudsman for Long Term Insurance.
“We think there are still insurers who don’t understand how important complaints are and don’t handle complaints the way we would want them to handle it,” she said at the release of the Ombudman’s 2014 annual report on Tuesday.
“We noticed complaints handling in some insurers improve and then fall back again – depending on how important people at the top think complaints handling is.”
As long-term insurers started to implement Treating Customer Fairly (TCF) principles, complaints against the industry dropped during 2014.
“There seems to be improvement in the complaints handling procedures of at least some long-term insurers, if not all,” said Ombudsman Ron McLaren.
“Despite an increase in the number of policies sold, growing public awareness of the office and the role of social media, there was a decline in the number of complaints received over the past year.”
Another general concern for both Peiss and Mclaren is that there are long-term insurance products on the market which are very complex.
“If even we struggle with understanding how these policies operate, then we can imagine policy holders are battling too – some of these products involve policies of more than 100 pages or even 170 pages,” said Peiss.
Examples of these complex kinds of documents are usually disability policies with an impairment combination.
Complaints regarding these kinds of products take the office of the Ombudsman a huge amount of time to resolve.
A third general area of concern is disability claims.
“We have seen that when the economy goes through a bad patch – like at present – there is an increase in disability complaints,” said Peiss.
The Ombudsman’s office received 9 246 written requests for assistance during 2014, a reduction of 8% over the previous year. This included 5 104 chargeable complaints.
The office finalised 3 822 complaints against long-term insurers and recovered more than R147m for consumers, while awarding more than R450 000 in compensation for poor service.
About 74% of the cases were finalised within six months and nearly 30% were resolved wholly or partially in favour of complainants.
Half of the complaints received by the Ombudsman’s office included claims that were declined on contractual terms or “non-disclosure”.
Most others related to poor communication and poor service. Complicated cases increased from 15.7% in 2013 to 18% of the Ombudsman’s case load.
According to McLaren, there were still excessive hospital cash back complaints, but there had been a significant reduction in the number of complaints after the Financial Services Board (FSB) had conducted inspections of an insurer from which most of the complaints had been received in 2013.
Peiss pointed out that if insurers see a particular hospital as a problem, they might write into their policies that they won’t cover patients going to those hospitals – in other words an attempt at “blacklisting” hospitals where there has been a problem.
The 2014 report shows a reduction in cases finalised in six months and McLaren ascribes this to the new business plan implemented by the office and where cases are first sent to insurers to try to solve it.
“As a consequence the cases coming back to us once considered by insurers tend to be on the whole the more complex cases. This is also what the industry experiences. It reports an increase in the number of complicated cases and the number of persistent complainers. Very often a complicated complaint is driven by a persistent complainer so it takes longer to finalise the complaint,” explained McLaren.
New type of complaint
He noted that a new type of complaint encountered in the past year involved the timing of proof of insurability.
In particular, policies that ask applicants whether they have had a negative HIV test in the preceding three years and if the answer was “yes”, the policy is sold and the applicant does not have to provide proof of the test.
However, if a claim is instituted on death, the insurer may require proof of the test.
“This case is still under consideration,” he added.
Expectations not met
McLaren said the office had also received a number of complaints by policy holders whose expectations had not been met when measured against what their insurers actually delivered. Causes of a divergence between expectation and reality included inappropriate marketing of policies, unclear or unusual policy wording and a lack of ongoing communication between the insurer and policyholder.
“We will look at marketing material issued to see if that ties up with what policy wording in the end is and also the design of the policy could be unusual or out of date,” said Peiss.
To take an independent view of whether the office of the Ombudsman provided a reasonable service in its complaints resolution process, a new Independent External Assessor (IEA) was appointed.
An external, independent review of key aspects of the office’s business was also conducted and found that the office of the Ombudsman complied with and exceeded international standards and expectations for a financial ombud scheme.
Surveys conducted also found that 90% of complainants would recommend the ombudsman’s service to others. Amongst insurers, 96% regarded the office’s decisions as fair and unbiased.
The office also publishes individual insurer complaints data on its website to to promote accountability and transparency.
McLaren said this was to encourage insurers to benchmark their standards of complaints handling against other insurers and to learn from insurers which appear to be better at complaints handling. Included for the first time are the names of the insurers that received more than five second reminders from the office and the number of reminders sent to them.