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Insurance brokers required to disclose exclusions to their clients

Thursday, 16 September 2010 08:33

According to the Short-Term Insurance Ombudsman (OSTI), your insurance broker is legally obliged to inform you of any exclusions on your insurance policy. The new Consumer Protection Act coming into effect on 24 October, requires that consumers be informed in plain and understandable language of any exclusions. Already prescribed by the Financial Advisory and Intermediary Services (FAIS) Act, the CPA reinforces this broker responsibility.

A recent ruling by the financial services ombudsman held two insurance brokers liable for not informing their clients of crucial policy information at the initial underwriting stage of the contract. An insured’s claim was repudiated after the broker failed to disclose a condition of the contract. The broker also tried to backdate the cover after failing to process it in time. The insurance broker had its license suspended by the financial services ombud.

The broker failed to indicate to the insured that not having a tracker on the vehicle will result in the vehicle being excluded from cover. The broker then “accidentally” indicated to the insurer that the vehicle did indeed have a tracking device. When the owner put in a claim after the vehicle was stolen, the insured rejected it on the grounds of not having a tracking device. The broker was at fault.

The dishonesty on the part of the broker, says the ombud, is the reason for the ombudsman being in existence. The obmudsman serves to protect consumers against the dishonest behaviour of brokers and financiers.

Laher Insurance Brokers was ordered to pay Akoob Laher R80 845 (R85 100 less the basic excess of R4 255) plus interest at a rate of 15.5 percent calculated from seven days after the ruling to the date of final payment.

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Insurance brokers required to disclose exclusions to their clients

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