Did you know that you can be deemed uninsurable by insurance companies and be forced to pay astronomical premiums just to stay covered and to protect your assets?
*Sibongile’s previous car was written off after its headlights were stolen, and she was surprised where her insurer deemed her uninsurable when she wanted to insure her new vehicle.
They told her she’d have to pay a premium of about R8,000 for one-month for the car and thereafter look for another insurance provider. They said she had become a risky client due to two prior claims for concealed water leaks and the resultant damage to her bedroom cupboards.
She had lodged three separate claims in three years, which led to her to be an undesirable client, so she was told.
Desperate and worried about driving around in an uninsured vehicle, Sibongile would spend the following week sourcing a new insurer. They closed their doors on her though some companies refused to even provide a quote. A couple of companies gave astronomical quotes of about R7,000 per month for the vehicle.
Eventually, one insure gave her a lesser, reasonable price of R3,000 she hesitantly accepted as she was desperate.
Sowetan Consumer approach some insurance companies to find out more about the concept of being uninsurable.
Question: When do people become uninsurable and how common is it?
Answer: Uninsurable usually means an insurer is not able to offer you cover for a specific risk at that point in time. This can happen if the insurer believes the risk is too high, too uncertain, involves illegal activity, or has not been honestly represented.
This is not common. Most people can get insurance, although your premium, excess or cover terms may differ depending on your risk profile. You are more likely to be declined if there is a pattern of unpaid premiums, repeated or suspicious claims, previous cancellations, non-disclosure, or a payment or credit history that raises concerns about whether premiums will be paid consistently. − Ernest North, co-founder of Naked Insurance
Question: What are some common mistakes that lead to people being uninsurable?
Answer: Non-disclosure or misrepresentation − such as failing to disclose previous claims, prior policy cancellations, criminal history or material information relating to insured assets or risks. This may also include being listed on industry databases such as fraud registers.
High-risk profiles without adequate mitigation measures − for example, not installing required vehicle tracking devices for high-risk vehicles, or inadequate home security measures such as alarms, beams or armed response.
Policy lapses and cancellations − where premiums are not paid, resulting in policies lapsing or being cancelled. In addition, frequently switching insurers purely for cheaper premiums can sometimes lead to inferior cover or excess structures that may become difficult to manage at claims stage.
Fraud or suspected fraud − including inflated claims, staged incidents or misleading supporting documentation. − Rudolf Britz, chief commercial officer at Momentum Insure
Question: Why do insurers make people uninsurable and how does it benefit them?
Answer: Insurance is just the facilitation of aggregating funds by many, to pay for the unlucky few who have losses. It is very similar to a stokvel.
So, when one person erodes the fund frequently and inadvertently proves that they intentionally want to do so, they become a burden on the entire fund.
It is then in the best interest of all participants in the fund that the bad apple be removed. The alternative is that everyone’s premiums go up to fund the losses (which are often behaviour-related or not real at all). − Britz
Question: What can people do to avoid being uninsurable?
- Improve their risk profile by installing vehicle tracking devices where required, parking vehicles in secure areas and ensuring appropriate home security measures are in place.
- Properly maintain insured property to reduce preventable damage and deterioration.
- Maintain policy continuity by avoiding lapses due to unpaid premiums and building a positive insurance track record over time.
- Be fully transparent and disclose all relevant information, including prior claims history and any changes in insured risk, such as relocation or changes in vehicle usage.
- Read and understand policy terms and conditions to ensure a full understanding of the scope of cover, policy obligations and claims processes.
- Use a broker where appropriate, as brokers can assist clients in structuring suitable cover, accessing multiple insurers and securing insurance aligned to their specific risk profile. − Dr Hardy Ncube, head of personal products at Standard Insurance Limited
Question: How can this be rectified from the consumer’s point of view and what are the timeframes to fix it?
Answer: It depends on why you were declined. If the issue is incorrect or incomplete information, it can often be fixed quickly by providing the correct details or supporting documents. If it relates to missed payments, you may need to settle what is owed and rebuild a clean payment record over time.
If the issue is repeated claims, you may need to show that the risk has improved, for example by improving security or repairing maintenance problems. If the issue is fraud or dishonesty, it is much more serious and may be difficult to fix.
It is worth noting that one decline does not necessarily mean you will never get insurance again. Different insurers have different rules and risk appetites. The best protection is to be honest, keep your policy information updated, and pay your policies on time. − North
* Not her real name
Sowetan
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