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Consumer options in life insurance claims disputes and how the landscape is shifting
BUSINESS MAVERICK
A quick search on the internet reveals a plethora of articles related to the recommended processes you should follow if you have an insurance claims dispute.
The advice is solid and sensible in-so-far as it generally recommends the logical process of taking up the matter with the relevant insurer first. This could include an appeal process through an internal ombudsman or arbitrator, before you refer the matter to the relevant ombudsman – as provided for under the National Financial Ombud Scheme of South Africa (NFOSA).
You will also find references to arbitration; mediation and litigation in the dispute management processes recommended, although these are seldom pursued.
None of this good advice is very helpful however, when faced with the reality of the immense personal cost that claims dispute processes have when it comes to the often frustratingly slow and impersonal nature thereof, further compounded by poor communication.
When a claims dispute results in the withholding of much needed financial support in the event of death or life changing injury or illness, there are additional knock-on ‘costs’ that detract from the quality of a claimant’s life while they wait for a final outcome which often takes months, or even years to reach. In addition to the obvious monetary vacuum and lack of funds for living expenses and medical treatment, obtaining expert input for your argument with an insurer may also add to costs if you choose this route. Yet to date nothing seems to have shifted the needle on expediting resolution in such matters. In fact, professional experience indicates things are slower than ever on this front.
In a current matter at the time of writing, the life assured was 20 months down the line in arguing a terminated income benefit, where the life office had taken between two to three months to respond on each interaction seeking clarity on the matter. Each response constituted little more than a regurgitation of what had gone before, in spite of the clearly outlined issues in question. In essence there was little indication of the (insurer’s) will to constructively engage in reaching resolution.
The matter proceeded to the life division of the NFOSA in month 17, with further detailed attention only received from this office three months later. The status at month 20 was that the life assured had received confirmation of the NFOSA’s liaison with the insurer, along with a copy of their (insurer’s) response, to which he duly replied within 10 days. Another wait commenced. The matter is ongoing and has not been resolved.
Of note is that it took six weeks for the NFOSA adjudicator to forward the insurer’s response to the policyholder; this time delay is most likely the result of an understaffed and overworked NFOSA team.
This example is by no means unique. Neither is it exceptional. It is sadly, the increasingly experienced norm over recent years when dealing with disputed claims matters.
It is plain to see that this long-winded, tedious methodology flies in the face of acknowledging, recognising, upholding and embracing the basic human right to dignity. There is nothing dignified about the policyholder’s situation – calling for resolution over a period of 20 months while living in a financially stressed situation due to ill-health.
What makes matters far worse in this particular example is that the policyholder repeatedly asked for mediation, to try to obtain clarity and reach a meeting of minds sooner rather than later, whatever the outcome. This request was ignored at every turn without explanation, in spite of its obvious merit for all concerned.
Life insurers, irrespective of their need to conduct business in a sound financial manner, cannot reasonably or justifiably continue to hide behind lengthy, unwieldy processes that trample on the human dignity of the lives they insure. Neither can the NFOSA. Not without running the increasing risk of falling foul of upholding one of the most fundamental of human rights. And not without serious reputational risk, combined with a vulnerability to being tested on the need to provide relief in the form of constitutional damages.
No institution is above the law, and it must be recognised that constitutional damages may be appropriate if an insurer’s actions violate the rights of their policyholders. Once awarded, the precedent of such damages would impact across the board.
What is urgently needed in the South African life insurance industry is a timeous, cost effective, readily available and accessible method that allows policyholders and life insurers to positively engage in listening to one another in disputed claims matters. There needs to be a space provided where each has the opportunity to share their point of view and hear what the other is saying, so that resolution can be found; in whatever form it is ultimately determined.
Outside of the moment at which an insured benefit is sold, the only time at which an insurer is able to illustrate its recognition of human dignity, as well as demonstrate its own sense of identity and worth as an organisation, is at claims stage. There is no other time at which the insured relationship becomes as real in the human sense than when the need for the insured benefit arises.
Life insurers in South Africa would benefit greatly from embracing mediation – particularly facilitated mediation – in managing and finalising claims disputes. This would not only advance and improve their service offering locally, but possibly also set an admirable global trend.
There are numerous positive aspects to mediation, including:
- Affordability: it avoids the expense of legal and court fees;
- Time: disputes can be resolved in a matter of weeks or months from the time that they arise and within hours once the mediation meeting commences;
- Confidentiality: mediation meetings are confidential, which is beneficial and comforting to both parties;
- Collaboration: the collaborative nature of the process preserves relationships and ensures that all parties are equally heard;
- Further resolution: in the event of unsuccessful mediation, the policyholder can still proceed to the NFOSA or litigation if desired.
Proactive engagement in this type of dispute resolution process will minimise the inevitable huge adjustment that will be created by the upcoming mediation legislative changes. It is only a matter of time before this draft legislation is finalised and promulgated.
A shift in the landscape in embracing mediation as a standard means of managing life insurance claims disputes invites solutions that are in the interests of all the parties involved.
If ever there was a time for life insurers to step up; be ahead of the game and demonstrate their willingness to recognise and embrace the humanness in the lives they insure, it is now.
Elise Burns-Hoffman
First published by Business Maverick on 29th December 2024.
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