Credit worthiness misrepresented

Details of the Claim

The Complainant bought a new Honda JAZZ and purchased insurance cover accordingly. During the sale of the policy, she was asked in Afrikaans whether she, the regular driver of the vehicle, had ever been blacklisted, liquidated or sequestrated.

The Complainant claimed her answer to this was “Nie waarvan ek bewus is nie” (Not that I was aware of). Cover was put in place and three months later the complainant submitted a claim for damage following a motor vehicle accident. Upon investigation by the insurer, it was found that the complainant had been blacklisted for a number of unpaid accounts prior to inception of the policy and the claim was rejected on the basis of “non-disclosure, mis-description or misrepresentation”.

The complainant denied having misrepresented her credit history and submitted a complaint against her insurer with the Ombudsman for Short Term Insurance.

The complainant’s view

The complainant was adamant that she had not withheld any knowledge of a bad credit history from the insurer at inception of the policy and was of the opinion that the insurer should have run a credit check on her prior to granting the policy as opposed to doing so only when a claim is submitted. The insurer had collected her premiums since the policy inception and was therefore obliged to pay her claim for accident damage to her vehicle.

The complainant advised that she had requested her Insurer to provide her with the voice recording of the sale of the policy to prove that she had intentionally withheld her bad credit history from the insurer, and when the insurer advised her that they may experience difficulty in doing so, the complainant was of the view that such voice recording did not exist.

The complainant was of the view that her insurer was not able to prove their allegation, should have conducted the credit check prior to granting the policy cover and having failed to do so, should therefore be made to entertain her claim in full.

It was also argued by the complainant that she had been granted the loan to purchase the vehicle by the financier which would pose a greater risk to the financier had she been blacklisted and the insurer should therefore had no objection to granting the insurance cover over her vehicle.

The insurer’s view

The insurer provided the Ombudsman’s office with the complainant’s policy schedule which included the complainant’s response to her creditworthiness together with their stance in the case of non-disclosure, mis-description or misrepresentation of same. The Ombudsman’s office was also provided with a copy of the credit check conducted on the complainant during the investigation of the claim as well as the voice recording of the sales conversation in support of their decision to reject the complainant’s claim for the motor vehicle accident and their decision to cancel the policy.

The insurer argued that, had they been notified of the complainant’s credit history during the sale of the policy, they would not have granted the complainant cover and would therefore, not have exposed themselves to the moral risk that the complainant represented.

The decision to reject the complainant’s claim by insurers and to cancel the policy was aggressively maintained by the insurer.

Ombudsman’s View

The credit check on the complainant provided by the insurer clearly indicated “bad debt written off” by five (5) separate institutions to the value of R71 201 over a period of 18 months prior to inception of the policy. The voice recording confirmed that the complainant answered in Afrikaans “Nee, glad nie, uh uh” (no, not at all, no-no)when asked by the insurer whether she had ever been blacklisted, liquidated or sequestrated during the sales conversation.

The office of the Ombudsman provided the complainant with the credit check as well as the voice recording obtained from the insurer for her ease of reference and allowed her the opportunity to comment thereon. The complainant was thereafter unable to provide an adequate explanation for her response to the insurer’s question regarding her creditworthiness.

It was the view of the office of the Ombudsman that it was clear that the complainant could not have been unaware of her bad credit history under the circumstances and indicatively withheld such information from the Insurer during the sales conversation.

Based on the information available, the insurer’s argument that the complainant’s non-disclosure of her bad credit history prejudiced insurers from making an informed decision whether to accept or reject the risk, was upheld. The Ombudsman’s office could therefore not make a ruling against the insurer for their decision to reject the claim and cancel the policy.

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