When it comes to filing an insurance claim, many people assume that their policy will automatically cover them, regardless of their actions. However, there’s a critical element that often gets overlooked: the conduct of the policyholder before and during the claims process. Insurers assess not only the damage or loss in question but also whether the claimant acted responsibly and adhered to the terms of their policy.
Christelle Colman, CEO of Ami Underwriting Managers, part of the Lombard group of companies, notes that awareness of behavioural conditions in insurance claims has improved, but challenges remain. Recent data from the National Financial Ombudsman (NFOSA) show that during the 2023 financial year, the Ombudsman for Short-Term Insurance (OSTI) saw a decrease in finalized complaints, dropping to 9,992 cases from 10,411 in 2022. This decline suggests progress in consumer understanding of policy terms and improved insurer behaviour, but there are still areas where policyholders need to be cautious.
Understanding Behavioural Clauses
Behavioural clauses in insurance contracts require policyholders to act in good faith by taking reasonable steps to protect their insured property and avoid reckless behaviour that may lead to loss or damage. Examples include locking your car, securing your home when you are away, and maintaining a safe driving record. Any deviation from responsible behaviour can lead to claim rejections.
Christelle explains, “Non-adherence to security measures is one of the leading causes of claim rejections. For instance, if a homeowner fails to maintain a linked alarm system, which is a requirement for burglary cover, and a break-in occurs, the insurer may reject the claim due to insufficient security measures. Insurers need evidence that policyholders have taken every reasonable step to prevent loss, and failing to do so can nullify coverage.”
In addition, many homeowners fail to update their policies when they buy or replace items. This oversight can result in claims being rejected because the new items were not disclosed to the insurer. Similarly, neglecting property maintenance can lead to rejections. Insurers expect that properties are kept in good condition, and claims related to damage resulting from poor maintenance are frequently denied.
Motor insurance claims are another area where policyholder behaviour plays a significant role. Christelle highlights that “driving under the influence of alcohol or narcotic substances, driving without a valid license, or engaging in reckless driving can all result in a rejected claim. Insurers require that drivers act responsibly, and any evidence of reckless or illegal behaviour can invalidate coverage.” Claims involving unroadworthy vehicles, such as those with faulty windscreen wipers or worn-out tires below the legal tread limit, are also often repudiated.
Insights from Recent Statistics
According to the OSTI, the top five reasons for insurance claim rejections are:
- Non-adherence to Security Measures: Claims are frequently rejected because policyholders fail to comply with security requirements, such as maintaining a linked alarm system for burglary cover.
- Non-disclosure: Providing incomplete or inaccurate information at the time of purchasing the policy can lead to denied claims.
- Poor Maintenance: Damage resulting from neglect or poor maintenance is a common reason for claim rejection.
- Unroadworthy Vehicles: Motor insurance claims can be denied if the vehicle involved in an accident is found to be unroadworthy, such as having worn-out tires or faulty brakes.
- Driving Under the Influence: Claims are often repudiated when the driver was under the influence of alcohol or narcotic substances at the time of the incident.
These reasons underscore the importance of adhering to policy conditions, ensuring full disclosure, and maintaining your property or vehicle in good condition. The OSTI has managed to improve turnaround times for finalizing complaints, and the decline in numbers indicates fewer disputes escalating to the Ombudsman level. This improvement suggests that consumers are beginning to better understand their obligations, and insurers are becoming more transparent about policyholder responsibilities.
However, a substantial portion of policyholders still experience claim rejections due to preventable factors. This includes failing to disclose important information or engaging in risky behaviour. The Ombudsman’s report underlines that when a claim is rejected, it often stems from situations where the policyholder did not meet the behavioural expectations outlined in their contract.
What Does This Mean for You?
According to Christelle, “The key takeaway is that being informed and responsible can significantly enhance your chances of having your claims approved. While the insurance landscape has evolved, the core principles of responsible behaviour, transparency, and understanding your policy remain as relevant as ever.”
Insurers are, after all, in the business of managing risk, and they expect policyholders to do the same. Your actions before, during, and after an incident are crucial in determining whether you receive compensation. By being vigilant, adhering to safety measures, and communicating openly with your insurer, you can greatly improve your experience when filing a claim.
In conclusion, the updated 2024 statistics from OSTI reinforce the message that responsible behaviour is not just about being a good citizen—it’s also about protecting your financial interests when it comes to insurance. Understanding your policy, complying with its terms, and acting with caution can mean the difference between receiving a payout or facing a rejected claim.