Insurance Blacklisting - Know your rights

People freely talk about being 'blacklisted' by short-term insurance companies. Not only is there not such a thing, there is also a wrong perception about the real situation," says Steve Zietsman, Head of Marketing and Communication at Santam, SA's largest short-term insurer.

Zietsman says short-term insurance companies have a duty to manage their risks prudently and properly in order to keep their insurance premiums at an affordable level, in the interest of its clients.

In doing so, they have to deal with three matters:

1. People exposed to unacceptably high risks

2. People who are "moral risks". This is where a fraudulent activity was identified in a persons dealing with a specific company, either in underwriting or through the submission of a false claim

3. Duplicate claims being submitted to more than one company (fraudulent claims)

It is not uncommon that an insurance companys exposure to risk becomes unacceptably high due to either the failure or the inability of a policyholder to keep risks within reasonable limits. When this happens we sometimes find it necessary to cancel such a policy, in which case the company is no longer prepared to extend the particular insurance cover to the client, given that person's circumstances.

"For instance, if a person has had a policy with us for 50 years, with minimal claims, and at the age of 70 starts becoming involved in two accidents every month. Although we will initially pay out, it becomes apparent that this person is now too high a risk - they shouldn't be driving a vehicle - and they may become uninsurable risks.

"Similarly, if a person lives in an area with high water levels resulting in frequent flooding of their home, or in a high crime area against which they are unable to provide sufficient security, they become a 'geographical risk' and may become uninsurable." However, emphasises Zietsman, should they move to a safer suburb, where flooding or robbery is less likely to occur, they will once again be able to obtain insurance.

Zietsman says even if a claimant has an excellent track record, if there is a sudden spate of claims, whether petty or large, this automatically rings alarm bells and we will investigate and cancel a policy if it is found that the risk is becoming unacceptably high.

The common perception that people who have had their policies cancelled are placed on a blacklist that is shared among other companies is altogether wrong. What is true, though, is that anyone has to disclose such information, should they be asked by another company whether they have previously had insurance cover terminated because of unacceptable risks. It is up to the other company to decide whether they are happy to accept such risk, and at what price.

A number of companies in the insurance industry also share in a common database of claims information. The aim is to identify possible duplicate claims (thus fraudulent conduct) and to safeguard honest clients from the unnecessary penalties that may result.

A company may also decide to cancel a policy on the basis of "moral risk" - where a fraudulent activity was identified in a persons dealing with the company, either in underwriting, or through the submission of a false claim.

"We constantly remind policyholders to take all precautions and care to prevent or minimise loss or damage to their possessions - if it is clear that this is not happening - it wouldnt make commercial sense for us to continue paying out claims which ultimately push up premiums for everyone else."

"If you work through a broker they will automatically take up an unjust cancellation with the insurer, however, if you do not work through a broker, you have every right to put your argument forward to the insurer directly or, alternatively, to contact the Insurance Ombudsman on 0860 726 890.

"The Ombudsman is an impartial mechanism through which the industry ensures policyholders receive fair treatment and service, and it provides a fast-acting, readily available port of call for disputes relating to claims without incurring costly legal fees", says Zietsman.