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Annual Report for 2009 (2010)

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The Ombudsman for Short-Term Insurance launched his Annual Report for 2009 to guests at a function held in Johannesburg today (Friday 26 March 2010).

Both the Chairman and the Ombudsman in their respective reports speak of 2009 being remembered as one of the most difficult years in the history of global economic activity and its impact upon the short-term insurance industry, where for the first time, the Office has seen a decline in the number of complaints received. Brian Martin, the Ombudsman for Short-Term Insurance attributes the decline to the state of the economy and in particular the state of the motor industry, where motor vehicle sales declined by 58.40% from 2006 to 2009. Insurance complaints relating to motor vehicle insurance usually top the list in terms of the highest type of complaint received by the Office, but this figure declined as well for 2009, where 56.4% of all complaints received related to motor vehicle insurance.

On a positive note, the year saw the Office recording the highest monetary value of recoveries for consumers ever at R136, 4 million which represents a significant increase of 18% over the recovery in 2008.

The turnaround time for the resolution of complaints remains one of the biggest challenges for the Office and currently sits at 233 days, which the Ombudsman feels is unacceptably high. Steps have been implemented to remedy the current situation, such as regular meetings being held with insurers to resolve outstanding matters and the introduction of an early settlement incentive to insurers where, if they settle a matter with their insured directly and within a period of 30 days, the Office will reduce their fee by 50%. "Some insurers have embraced the incentive resulting in some of the complaints being resolved promptly. However one of the major reasons for the delays in resolving matters is the time taken by insurers to furnish the Office with a formal response to a complaint", says Brian. "In 2010 our Office will introduce a penalty in cases where time guidelines have not been adhered to by insurers. In these cases the normal fee charged by the Office will be doubled."

The report also tackles the debate surrounding the establishment of a single independent Ombudsman Scheme for the financial services industry and draws attention to the fact that easy access to Ombudsman Schemes should not be confused with their effectiveness. "If any Ombudsman Scheme is to enjoy recognition and confidence in the eyes of consumers, it is vitally important that independence is actively promoted and maintained", says Brian.

The Office also deals with commercial complaints from consumers and in 2009 it received 501 such complaints. Currently the Office has no jurisdiction to consider complaints from third parties against the conduct of insurers and the Ombudsman believes that it is time for the industry to seriously consider broadening its jurisdiction to consider such complaints.

In looking forward, the Ombudsman cites one of the major challenges which the Office will face in 2010 will be the formal introduction of the provisions of the Consumer Protection Act, which come into effect towards the latter half of the year. There is a perception that many parts of the sector have been exempt from the provisions, which is incorrect. The sector has been afforded a 'window' in which to align it self to the principles contained in the Act. "Our Office will apply the principles and provisions contained in the Act in our decisions and rulings, from the effective date", concludes Brian.

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