Can a short-term insurer spoil your insurance risk profile if you were involved in a car accident and made a third-party claim for damages against the insurance company of a person who admitted to being at fault?
A third-party insurance claim should not adversely impact your insurance risk profile on the Insurance Data System (IDS), a database administered by credit bureau TransUnion that contains consumer claims submitted by South Africa’s short-term insurers.
However, a ruling by the Ombudsman for Short Term Insurance on April 25 has revealed that short-term insurer Budget Insurance incorrectly classified a third-party claim by one of its customers on the IDS platform.
An incorrect classification could prejudice consumers because their insurance risk profile would increase, thus impacting their current and future monthly insurance premiums.
Gareth Miller, a 41-year-old based in Johannesburg, complained to the ombudsman that Budget had incorrectly listed two claims against his name on the IDS platform. The two claims also reflected on his claims enabler report, which details previous claims of consumers on the TransUnion platform to help insurers understand their insurance risk profile.
One accident, two claims
Miller said he never claimed from Budget and that the claims were for a car accident he was involved in at the end of September 2016.
A Pizza Hut driver bumped into the rear of Miller’s car, causing damages. The driver acknowledged to being at fault, resulting in Pizza Hut offering to settle through its insurer Paladin Underwriting Managers – known as a third-party claim.
One month after the accident, in October 2016, Miller took out a policy with Budget. As a result, Paladin requested a ‘no claim letter’ from Miller as evidence that he would not institute two compensation claims from Budget and Paladin for one accident, which is illegal. According to the ombudsman, a ‘no claim letter’ was issued by Budget.
Miller said he only had the one accident, but his claims enabler report indicated that he had two accidents on the same day. In other words, one incident was listed as two claims by Budget.
Miller was paid R18 845 by Paladin for damages to his car. However, his claims enabler report indicated that two insurance claims by another unrelated insurance company, Auto and General, valued at R31 500, were listed against his name. A breakdown of the R31 500 includes R27 500 for repairs to his car and R4 000 for car hire.
Miller discovered the two incorrectly listed claims at the end of 2018 when he queried why a R1 600 premium quoted on his Hyundai i10 by an alternative insurer, Old Mutual, was so high. The insurer informed him that the two claims with Budget were the reason for the steep premium quoted. Miller was no longer a Budget policyholder when he discovered this.
According to the ombudsman, Miller approached Budget about the two claims, and was informed that it was the insurer’s standard procedure.
However, the ombudsman differed with Budget’s position. “While it is accepted that all previous losses should be disclosed to an insurer [Budget] within a time frame determined by the insurer, these must be listed as ‘incidents’ and not ‘claims’,” the ruling reads.
After complaining to Budget, Miller was told that the insurer had removed the incorrect listings in December 2018. However, towards the end of February 2019, the incorrect listings were still in his name.
Budget’s head of insurance Tyrone Lowther said the delay in correcting Miller’s claim information was caused by TransUnion. Budget believed TransUnion had updated Miller’s information in December 2018 because the credit bureau confirmed to the insurer that the matter was resolved. But it wasn’t.
‘Token of apology’ rejected
Lowther said Budget offered to refund Miller a year’s worth of premiums valued at R17 504.28 as a “token of apology” which the insurer believes is “extremely fair given that there is no evidence to support his view that he has been financially prejudiced”.
Miller rejected the offer and made a R250 000 counter-offer, which Budget rejected.
After the adverse claim information was corrected, Miller said the R1 600 premium he was quoted by Old Mutual dropped to R1 050. He accused the Telesure Group – which owns Budget, Auto and General, Dialdirect, 1st for Women, Virseker and Hippo – of deliberately classifying third-party claim information incorrectly, which could result in consumers paying higher monthly insurance premiums.
The ombudsman did not make a ruling on whether the listing of incidents as claims could lead to anti-competitive behaviour, or whether Budget’s conduct impacts the public at large. The ombudsman said it doesn’t have jurisdiction to make such determinations but that the Financial Sector Conduct Authority (FSCA) does.
Miller approached the FSCA, which found that there was insufficient evidence that Budget had contravened financial services regulations or acted fraudulently.