Insurance ombuds’ complaints highlight ‘financial epidemic’ and rolling blackout risks

23 May 2023

Although the Covid-19 pandemic is largely behind us, consumers are battling a financial epidemic with symptoms including rising interest rates, steep inflation, and of course the rolling blackout scourge. The direct result has been an increase in complaints related to lapsed life insurance and short-term insurance policies as consumers struggle to manage diminishing wallets.

The offices of the long-term and short-term insurance ombuds released their third combined annual report this week, reflecting financial distress and the impact of rolling blackouts on consumers. Speaking at the launch of the annual report for 2022 on Tuesday, the outgoing long-term insurance ombud, Judge Ron McLaren, who has served for 10 years, pointed out that from 2020 to 2022, the insurance ombuds’ offices received more than 90,000 complaints.

“The aggregate sum of money recovered in that period on behalf of consumers was more than R1-billion, which is a telling amount of money,” he said.

On the life insurance side, funeral policies accounted for the lion’s share of complaints at 48%.

“Declined claims are still the biggest cause of complaints, accounting for 45% of the total number of complaints in 2022. Lapsing remains a concern as some policyholders still experienced the after-effect of the Covid-19 pandemic on their financial situation and were unable to pay their premiums,” the annual report states.

When it came to car insurance complaints, 194 cases related to the non-payment of premiums, while the life insurance ombud reports that lapsed policies account for 317 or 9.03% of long-term insurance complaints.

Rolling blackouts no longer an unexpected event

According to the office of the short-term insurance ombud, the higher incidences of rolling blackouts have resulted in greater risks for consumers, including damage to electrical appliances and electronic devices, theft and related incidents, spoilt food, and recently, more frequent theft of electrical cables from the national grid. Claims related to power surges accounted for 20% of household contents insurance complaints, an increase of 4% on 2021.

“The theft of electrical cables is a particularly heinous crime since it has more significant implications for the public, a damaging effect on the economy and their livelihoods, and threatens people’s lives in some instances.

“Patients on life-support systems and those whose medication requires refrigeration face fatal consequences. Traffic flow is impacted, resulting in motor accidents and ordinary business operations. The agricultural and logistics sectors have now also expressed concerns and highlighted risks relating to food security,” the ombuds said in a press release.

While the rolling blackouts effect can largely be put down to the human faults of mismanagement and corruption, Mother Nature has not been much kinder. Changing weather patterns, and a volatile sociopolitical climate with resultant uprisings and upheavals as evidenced by the KZN, Eastern Cape and Gauteng natural disasters in 2022 and looting incidents in 2021, have led to reinsurers reviewing their appetite for SA risk.

This affects South African insurers, their exposure to the related risks, and their willingness or capacity to underwrite some of them. Short-term insurance ombudsman Edite Teixeira-Mckinnon says the upshot is that the cost of insurance, in general, is likely to increase as these risks permeate all aspects of life.

There has been a noted steady increase in power surge-related complaints from 3% in 2018, to 6% in 2019, to 11% in 2020, and to 16% in 2021. The ombud’s office encourages consumers to familiarise themselves with their insurance policy’s terms and conditions.

“Some insurers have argued that because load shedding is scheduled, it can no longer be viewed as an unexpected and unforeseen event,” Teixeira-Mckinnon warns.

Most insurers have changed the cover afforded in relation to power surges, and how they view the risk of a power surge. If cover is provided, it may be that some policies will offer the cover as a separate benefit, for which a separate premium must be paid. DM

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Rolling blackouts no longer an unexpected event