When you enter into an insurance contract, you are required to disclose any information that may affect your risk, and hence determine whether the insurer will accept the risk and, if so, the cost of your cover. However, when assessing your risk, either by phone or by means of a questionnaire, the insurer must ensure that the questions are clearly worded and free of ambiguity, and that they trigger your duty to disclose the required information.

In two case studies in the July 2015 edition of the Ombudsman’s Briefcase, the quarterly newsletter from the office of Dennis Jooste, the Ombudsman for Short-term Insurance, decisions by the ombudsman went the way of policyholders because their insurers did not ask the right questions at the risk-assessment stage.

Ms K claimed from Outsurance for the theft of her car. Outsurance rejected the claim on the grounds of non-disclosure, saying that when she was sold her policy, Ms K had not disclosed that she had a criminal conviction for fraud.

Outsurance submitted that had it known of Ms K’s fraud conviction, it would not have insured her. It had become aware of her conviction when investigating the claim. It rejected the claim, voided the policy and refunded Ms K all her premiums.

In coming to a decision, the ombudsman first referred to the Short-term Insurance Act, which states that you may not be penalised on account of non-disclosure of information unless such information is likely to have materially affected the assessment of risk. In the normal course of events, a criminal conviction would materially affect the assessment of risk.

However, the ombudsman said it must be considered whether, during the sales conversation, the insurer had led Ms K to believe that her criminal conviction was not material to her risk and that, therefore, she was not obliged to disclose it.

Questions asked by the sales agent referred only to specific types of convictions, judgment orders and Ms K’s insurance history, not to her general criminal record. This, says the ombudsman, was not enough to trigger her mind or create the impression that the insurer was interested in her criminal record apart from that covered by the questions.

The ombudsman referred to two similar cases that had to be resolved in favour of the consumer: one in which the “interplay” between generalities and specifics during a telephone conversation caused confusion, uncertainty and ambiguity; the other in which questions about claims fraud could not have been expected to trigger a duty on the part of the consumer to disclose a fraud conviction not related to an insurance claim.

The ombudsman found that Outsurance had not created a duty on Ms K to disclose her criminal record; in fact, it had created the impression that her conviction was immaterial. He asked Outsurance to settle Ms K’s claim, which it agreed to do.


Mr V submitted a claim to his insurer, Regent Insurance, for damage to his vehicle in a motor accident. Regent rejected the claim on the grounds that Mr V had not disclosed that the vehicle would be used as a metered taxi.

Mr V submitted that, when he bought the vehicle and applied for finance, he had told the salesperson at the dealership that he would be using the vehicle as a taxi. He said the salesperson, who also did the underwriting as an agent of the insurer, asked for supporting documents for the finance application, and would therefore have been aware of the business Mr V was conducting with his vehicle.

Regent said Mr V had disclosed that he would be using the vehicle for “business use” when, in fact, he would be using it for “commercial use”. The policy wording made a distinction between the two, with “business use” covering use for professional or business purposes excluding commercial use and the carrying of stock in trade. It said the carrying of passengers for reward was “commercial use”, which was not covered.

The ombudsman pointed out to Regent that it had failed to prove that Mr V had intentionally failed to disclose the type of commercial activity he was involved in. He said the insurer’s agent had a duty to ask the relevant underwriting questions and to furnish the insurer with the correct information regarding the use of the vehicle. He asked Regent to pay out Mr V’s claim in full, which it agreed to do.


Subject to certain restrictions, the use of second-hand parts to repair a vehicle is an acceptable insurance practice.

Mr B complained to the office of the Ombudsman for Short-term Insurance because he was not satisfied with the repairs done to his car by the repairer appointed by his insurer, Standard Insurance. He had discovered that the repairer had used second-hand parts.

Standard argued that it was entitled to use second-hand parts, because it was essentially swopping “like for like”.

The ombudsman says the original parts on the vehicle were also “second hand”, although they might have been new when Mr B had bought the car. If new parts were used, Mr B would have been placed in a better position than before, and a principle of insurance is to place you in the same, but not better, position you were in before the damage occurred. The ombudsman says that as long as the parts are of a quality at least as good as the parts that had to be replaced and that the safety of the driver and occupants is not compromised, he could not fault the insurer’s decision.

*Send complaints about short-term insurance policies to the office of Dennis Jooste, Ombudsman for Short-term Insurance to info@osti.co.za, or call 0860 726 890. For more information, visit www.osti.co.za

Article credit: http://www.iol.co.za/business/personal-finance/insurers-must-ask-the-right-questions-1.1914864#.Vfa28JbFxIU