If you defaulted one or more of your accounts, would you let the company that insures your car know about it? Probably not, if you’re still paying your car insurance premium in full and on time, right? But there’s most likely a clause in your policy document that compels you to do so, and if you don’t, you could have a car-related claim rejected and even the policy cancelled as well.
It’s what the industry calls the “ongoing duty of disclosure”. That’s understandable when it comes to moving to another area or province, or your newly licensed son or daughter taking over as the regular driver, because those factors have an obvious and significant impact on risk, requiring your policy — and the premium — to be adjusted accordingly.
But defaulting on unrelated accounts? In a country where, according to the National Credit Regular’s most recent stats, 9.8-million people are more than three months in arrears with their repayments, or have adverse listings on their credit records or judgments and administrative orders? That must equate to a staggering number of car and home insurance policyholders whose cover is at risk without them realising it. That’s if that disclosure clause is strictly applied, of course.
It happened to iWyze client Miles recently. Lured to a location in Winterveld, Tshwane, by a Facebook Marketplace advert for a TV, his bakkie, with a listed value of R350,000, was hijacked and not recovered. iWyze later rejected his claim and cancelled his policy, because he failed to inform the insurer that he’d defaulted on his home loan and credit card payments, some time after taking out the policy on his bakkie.
But how was the nondisclosure of his financial status material to the hijacking of his bakkie? Peter Nkhuna, senior adjudicator with the National Finance Ombudsman’s non-life insurance division, said such information was relevant because of the higher risk of fraudulent claims “when one’s financial position is not good; the risk of nonpayment of premiums and eventual policy lapses, which result in higher costs on the insurer; and the fact that some insurers do not provide cover under such circumstances due to the higher risk”.
If you have adverse credit bureau listings, judgments or defaults, check your car policy wording to see if you’re obliged to have that conversation with your insurer
Interestingly, a spokesperson for the Telesure group — which owns brands including Auto & General, Budget, Dialdirect and First for Women — said while all its brands asked those applying for policies whether they had ever had any judgments, defaults or faced criminal charges, as far as the obligation for “ongoing disclosure” was concerned, that only applied to developments involving dishonesty, such as a conviction for fraud.
So, if you have one of those policies, you couldn’t be tripped up by failing to disclose, some time after taking out the policy, that you’d been handed over to debt collectors for falling behind in your car repayments, for example.
Christelle Coleman, CEO of Ami Underwriting Managers, said while all car insurance policies obliged policyholders to declare certain personal financial information, before and after policy inception, “that would be applied in different ways to each particular case”, depending on their “treating customers fairly” stance. “We would only apply it if there was a direct link between the nondisclosure and the claim event,” she said.
“Material information” that Miles’s iWyze terms & conditions compelled him to disclose after the inception of his policy included “a change in your address, rejected claims, burglaries, accidents, defaults or judgments against you, changes of the regular driver or a change in the vehicle insured”.
In his claim rejection letter, iWyze told him: “During the validation of your claim, it was established that there was a material change in risk to your financial information. You have defaults against your name, and it exceeds our threshold amount of R100,000.” That threshold amount doesn’t appear in any of his policy documentation, according to Miles.
I took up his case, asking iWyze, an Old Mutual brand, how the repudiation was justified, given that his changed financial situation had no material impact on the claim incident. “We recognise that the customer has been through a traumatic time, and we are committed to helping him,” the company said. “After careful consideration we have decided to settle the matter in good faith by way of an ex gratia payment, given that his policy was voided due to nondisclosure of material financial information.” (In other words, we are not obliged to overturn our decision, given our policy wording, but we’re going to pay anyway.)
“This financial information is relevant to the underwriting risk of the policy, and not the claim. It is standard industry practice for insurers to have underwriting criteria to guide them regarding their risk appetite. The thresholds form part of iWyze’s underwriting risk criteria and will determine whether we will… insure or continue to insure a customer. For this reason, the customer’s policy will not be reinstated.”
Sadly Miles is now forced to disclose to a prospective insurer that iWyze cancelled his policy, which means he’ll be paying a much higher premium for the new cover.
If you have adverse credit bureau listings, judgments or defaults, check your car policy wording to see if you’re obliged to have that conversation with your insurer. And if you’re shopping for competitor quotes, be sure to compare the “ongoing disclosure” wordings as well.
CONTACT WENDY: E-mail: consumer@knowler.co.za X (Twitter): @wendyknowler Facebook: wendyknowlerconsumer
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