If you file too many claims against your car insurance policy your insurer may fire you as a client and note the fact that they cancelled your policy in the national Insurance Data System (IDS).
Finding an alternative insurance provider if this happens is no simple task, as they will check the IDS database when you ask them for a quote.
Insurers may decline to cover you based purely on the information in the IDS. Having a cancelled policy against your name alongside an eventful claims history is a big red flag.
This is feedback from the South African Insurance Association (SAIA) and OUTsurance.
MyBroadband contacted SAIA and OUTsurance following a detailed complaint on Twitter by Sarah Midgley, a public relations professional in Cape Town.
In her complaint, Midgley explained she went public after she referred her case to the Ombudsman for Short Term Insurance and did not receive satisfactory answers to her questions about the cancellation from OUTsurance.
She said that she had been with OUTsurance for 4 years and had a fairly normal claims history until recently.
Due to a combination of bad luck, poor weather, and Johannesburg’s potholes, Midgley lodged four claims in five months.
None of the claims were as a result of her own negligence, she said, adding that in three of the four claims she was not in the car when the damage occurred.
OUTsurance granted all of the claims, and Midgley did not suspect that anything was amiss.
She then moved provinces and contacted OUTsurance to notify it about the change of address.
Initially everything seemed routine and the OUTsurance consultant she spoke to even indicated that her premium would likely decrease.
She was told to expect a phone call the following morning. When it came, it was not to confirm that the change of address was successful, but to inform her that OUTsurance was cancelling her policy.
Midgley said she was told her policy was being cancelled because she is causing OUTsurance a loss.
While the policy cancellation was not immediate, Midgley said she struggled to find an alternative insurer and was only only successful thanks to the help of a highly knowledgeable broker.
OUTsurance confirmed that Midgley’s policy was cancelled as a result of multiple claims in a short period of time.
The company told MyBroadband it was coincidental that Midgley’s policy was cancelled after a change of address request.
“Most insurance policies allow for clients to cancel their cover with immediate effect and for the insurer to be able to cancel cover with 31 days notice to the client,” OUTsurance explained.
It said that unpaid premiums is the most common reason for an insurer to cancel cover.
“The exception to an insurer providing 31 days notice and allowing for immediate cancellation is where there has been dishonesty, fraud or misrepresentation identified on a policy or claim,” the company stated.
OUTsurance said that when you claim against your policy, they do inform you of the potential impact of going ahead with the claim such as an increase in premiums and excess, or cancellation of the policy.
Where the person who has registered the claim is not the policy holder, OUTsurance said it sends an SMS to the policy holder informing them of a claim being registered.
Midgley told MyBroadband that the notification procedure described by OUTsurance failed in the case of the final claim against the policy.
She explained that her ex-husband was driving the vehicle at the time and he called OUTsurance to report the accident and arrange for the vehicle to be towed.
In his call to the OUTsurance call centre, which MyBroadband has heard, the helpful agent immediately proceeds with registering the claim.
Only at the end of the call does the agent give Midgley’s ex-husband a generic warning that she has been identified as a multi-claimant and that continuing with the claim could affect the policy.
Midgley said that she as the policy holder was never given the option to decline to register the claim.
“I would not have allowed the claim to be lodged if I had known of the risk of cancellation and the resulting impact on my claimant profile shared with the IDS,” Midgley told MyBroadband.
“If this had ever been made clear to me, I would have looked at my [ex-]husband and/or the other party to carry the cost instead of claiming from Outsurance.”
OUTsurance told MyBroadband it is generally more difficult to obtain insurance if your policy has been cancelled previously.
Although insurers may cancel your policy for claiming too much, for them it is a last resort.
“We cancel very few clients due to an excessive claims experience as a first action and would rather apply remedial actions such as increased excess or a higher increase at renewal stage,” said OUTsurance.
SAIA highlighted that the Insurance Data System is not used to explicitly flag individuals as problem clients, but confirmed that the IDS is used to store claims history data and whether you have had a policy cancelled.
It is then up to individual insurers to decide whether to provide someone with coverage or not.
OUTsurance explained that claims experience and cancelled policies are important factors that insurers use to decide whether to give you cover or not.
OUTsurance told MyBroadband that it looked at a few factors when determining if a client needs action to improve on their claims experience, or if a policy is to be cancelled.
These factors include:
- Number of risks on cover.
- Claims frequency.
- Value of claims.
- How each client’s frequency and loss ratio compares to other clients.
“Very few clients are actually flagged monthly for cancellation or other measures,” OUTsurance stated.
MyBroadband asked OUTsurance to give an idea of how many claims it would take to get your policy cancelled, using any vehicle or policy configuration as an example.
“With all the factors that go into this, it is difficult to provide an example that may be used,” the company said.
OUTsurance advised that to avoid being cancelled by an insurer, clients must provide true and complete information, pay premiums as due, and manage their claim incidents.
“Claiming for low quantum matters that can be self insured is one way of reducing the risk and is also one of the reasons why an excess is applicable on most policies,” OUTsurance said.
“Clients also need to be aware that claims experience is one of the most important factors used by insurers in determining their risk profile and ultimately their premium. Many claims in a short period of time will affect their cover adversely.”
To find out more information about the Insurance Data System (IDS), MyBroadband first contacted TransUnion, which referred us to the South African Insurance Association (SAIA).
While TransUnion currently administers the IDS, the system is owned by SAIA.
“For over two decades, SAIA members (non-life or short-term insurers) have been able to contribute to and access IDS. In 2012 an updated version of the system was launched, which included a
streamlined process for submitting data,” SAIA told MyBroadband.
“There is currently a project (version 3) underway to further improve the system by improving on the quality of claims data shared by insurers, all towards combating insurance fraud and for underwriting purposes.”
The IDS does not store any contextual information about why a policy was cancelled, and the version 3 upgrade will not add a feature to do this.
“It is up to the person applying for a new policy to disclose all the information and to provide the context when they are first on the call with the insurance company at the underwriting stage,” SAIA stated.
“It should not be left to the insurer to discover that a previous policy was cancelled, particularly where the prospective client believes that the context is relevant.”
According to SAIA, insurers take into consideration all the information you provide on the initial phone call, which is recorded.
“This process may take longer where the insurance company needs to verify the context provided,” the insurance association warned.
“Insurers do not share with each other details of their reasons for cancelling a policy. It is up to the prospective insurer to establish the reasons from the client applying for a policy as this is part of the competitive process,” said SAIA.
“The onus is on the person applying for a policy to provide information and context.”
If insurers ignore all of the context you provide, or decline to listen to your explanations and deny you coverage, your only recourse as a consumer is the ombudsman and the media.
SAIA said that insurers consider the factors below to determine your risk profile and insurability:
- Driver’s age
- Valid licences
- Claims history
- Geographical location: Home address and work address
- How is the vehicle stored during the day and at night?
- Make and model of vehicle: this will determine the sum insured and cost of parts and spares
- Is the vehicle used for work, beyond commuting to and from a place of work?
- Will the car be insured on a named driver basis or not?
- Must the car be insured for the market or retail value?
- Type of vehicle: sedan, SUV, light commercial, and heavy commercial
- Is a tracking device installed or any other anti-theft devices?
- Level of coverage, such as third-party only
- How high must your excess be?
When assessing risk and setting premiums, insurers use the details provided by the client, and the information in the IDS together with their own information tools.
“Insurers use a variety of proprietary systems, algorithms and AI tools to help determine risk and to predict losses,” SAIA told MyBroadband.
“In each case, these systems are honed by the insurer’s own actuaries, data scientists, and other experts. These systems and tools are at the heart of an insurer’s competitiveness”.