Three things insurers will never tell you about life insurance

In May, the Ombudsman for Long-term Insurers (OLTI) released its 2018 report. Among other things, it detailed how many complaints were received and who the most complained-about insurers were.

On the face of it (11 768 written complaints), it seems that insurers still attract a fair amount of ire from the people they serve, despite positive signs from the industry: more than 68% of complaints investigated by the ombudsman were found to not actually be the insurers' faults, wholly or partially.

Yet, according to MiWayLife data, which came from reports from FSCA (FSB), ASISA and individual life insurance companies, there's more to this story. More than R29 billion in death claims are processed by South African life insurers annually, as is about R5.5 billion in disability claims.

Further figures show that a large insurer would have about 1.5 million clients, a mid-size insurer will have approximately 200 000 to 250 000 policyholders and a small insurer, under 100 000. This means each insurer has an average of about 450 000 service interactions with clients per year - a statistic which puts 11 000 written complaints across the entire industry in a lot more context.

So, perhaps insurers are doing less wrong than we thought?

Actually, the ombudsman's report made it clear that consumer ignorance was partially to blame, where complaints "are not articulated explicitly" and "complainants also often express the misguided wish that the insurer should be punished by the compensation award", clearly seeing a financial incentive in complaining.

The ombudsman stated further that there were cases which "in my opinion, were dealt with in a perfectly reasonable and competent manner. The fact is simply that the complainant did not accept the correctness of the ruling."

"Who is accountable for clients not being as financially astute as they could be, and does the industry communicate things as simply and clearly as they can?" asks MiWayLife CEO Craig Baker.

"We've decided to break the silence on some of the least-understood sides to long-term insurance.

"It's unfortunate that a lack of understanding and poor communication causes complaints, which no one wants. So, we've committed significant resources to creating usable content to explain some of the least-understood sides to long-term insurance."

Least understood thing #1: What you think is a complaint isn't always a complaint

• "What a customer sees as a complaint isn't actually always a complaint," says Baker. The loose definition of a complaint within most industries is the client giving feedback that the goods, service or delivery of those goods was not in line with what can reasonably be expected. As the Ombudsman's report shows, most insurers are actually well within independently set professional standards. So what gives? According to Baker, "within life insurance, the main problem with most people's complaints is that the insurer's processes are not transparent, well explained or they rely on others to fulfil on their behalf".

These are common complaints life insurers get:

• Policy documents not being received

"In the direct to client space, this is a common one, but in a very high percentage of instances, the policy documents are sitting in the wrong place, such as a person's spam folder," says Baker. "That, or their e-mail address has been captured incorrectly, which is very easy to clarify."

In addition to the regulatory checks, most insurers have quite automated processes for sending documents and the like, so the chances of a document not getting sent are minimal. "Because people inherently believe that service is poor across the board, they will often complain before checking their spam or contacting the company," says Baker.

"Of course, we see numerous variations of this, and in some cases, there are operational breakdowns. But in most instances, companies have tracking software that can see when a policy document was delivered, whether it was returned or even when and whether it was opened, yet some of these still result in complaints. Additionally, some clients still insist on physical copies of policy documents and where there is no intermediary, the companies are often subject to the vagaries of snail mail, which is far from ideal for the client or the company."

• Issues with debit order dates

Here, it is helpful to think of insurance as a product, just like a doughnut from Krispy Kreme or a gym membership. Just with other products, the rules are simple: no payment, no product. Which, in this case, means no protection should you claim.

"Sometimes, when there is a shorter month - like February or the start of holiday season in December - people's accounts may get debited earlier or later than the date they've elected," says Baker.

"Collections that fall on weekends are also generally shifted to the closest working day. Insurers will normally communicate this beforehand or even obtain consent to move the debit order dates at the point of sale. But people's lives are busy, which leads to complaints because they did not see the e-mail and are worried they'll be debited twice or that they won't have enough for their other debits.

"We also see clients playing a form of Russian Roulette, whereby they tend to 'cash manage' and will take a chance on returning their insurance premiums in the hope that nothing happens that month. Of course, everyone's budgets are squeezed, but we do see claims from people who have not paid premiums, and therefore do not enjoy cover when they need it most (another common complaint).

"Insurance is a contract that has requirements on both you and the insurer. As the company, we do everything reasonably possible to ensure cover when it's needed because often the client is no longer around to explain why they didn't pay their premium and the family that is left behind suffers," says Baker.

Least understood thing #2: You have rights - and there is a right way to complain

To go to the ombudsman about a smaller issue that you haven't tried fully to resolve with the insurer first, is simply wasting time as the ombudsman will generally refer it to the company to try and resolve amicably with the client first. Failing that, they may get involved, depending on the strength of the complaint.

"However, the preferred route is always to first go to that insurer directly - as insurers have become conditioned to think like the ombudsman, and in most instances, will resolve the issue fairly. This is indicative of the overturn rate that we see in statistics mentioned above. So, going to the ombudsman takes more time as official cases must be opened and investigations must be concluded. Give your insurer a chance to resolve it quickly. If that fails, you have another avenue to explore," says Baker.

Least understood thing #3: There may not always be a financial reward for complaining

Although the number is difficult to ascertain, there is a trend (and again it may be the tough economic climate) whereby people are beginning to complain for a financial incentive, not because something is grievously wrong and worth complaining about. If you're complaining mainly to get money awarded to you from the ombudsman, you should know that it's likely not to work.

"Clients should understand that even where something was done incorrectly, the finding in their favour may simply be to put things right without any financial award," explains Baker.

"Trust comes from people doing what they say they are going to do, and people do business with people they trust," says Baker. "Yet that alone is not enough. It's vital that we, as an industry, communicate with people better about how our processes work, so that they can feel safe as well as adequately protected when misfortune strikes. We still have a long way to go, but we are making a start," concludes Baker.

"MiWayLife is an authorised FSP (No. 45741) and its product offering is underwritten by Sanlam Life Insurance Limited, a registered long-term insurer."