Why Claims Fail!

When disaster strikes, you expect your insurance to respond. The good news is that most claims are paid. However, when claims are rejected, it is usually for avoidable reasons. Understanding these reasons can protect you from unnecessary financial loss.

Insurance fraud has become a significant risk in the non-life insurance industry, particularly in the current economic climate in South Africa, where tough economic conditions are creating the perfect storm. In addition, the proliferation of Artificial Intelligence (AI) tools has enabled fraudsters to execute increasingly sophisticated tactics. Chat platforms with instant shareability features like voice notes increase the risk. The insurer introduced a merit moderation process as part of claims validation. This will form part of your claims handling procedures. Merit moderation is done to ensure that fraudulent claims are identified upfront and, furthermore, to ensure that the claim is covered in terms of the policy wording. The ultimate goal is to protect good customers and ensure that insurance remains affordable.

The merit moderation process is implemented on motor and non-motor across personal, commercial, and agricultural claims.

With this communication we want to make you, as our business partners, aware of the utmost importance of the correct information stated in your insurance policy schedule. This is the first step to ease the process of reporting a claim. Your assistance in comprehensive and accurate claims registration is vital, and we urge you to assist us in this regard.

Reasons claims are repudiated or reduced

NON-DISCLOSURE / MISREPRESENTATION

Insurance is based on full and honest disclosure

•     Material facts are not disclosed at inception or renewal

•     Incorrect usage of vehicles

•     Undeclared previous losses

Please inform the broker of any changes.

UNDERINSURANCE

Your assets are insured for less than the true replacement value: the average clause will be applied.

•     Sum insured below replacement value

•     Incorrect stock or asset declarations

•     Outdated valuations

Review sums insured annually to reflect inflation

POLICY EXCLUSIONS

Every policy contains exclusions.

•     Wear and tear

•     Gradual deterioration

•     Mechanical/ electrical breakdown – unless covered

•     Maintenance and upgrades

•     Defective workmanship and items not built to code

•     Items under warranty

Insurance covers sudden, unforeseen events

CONDITIONS NOT MET

Claims may fail if

•     Security requirements not complied

•     Warranties breached

•     Tracking devices were not operational

•     Proof of ownership not proven

•     Loss not proven – damage reports and photos

•     Full cooperation not given during investigation

•     No assistance with additional information or quotations

This will result in the claim to be repudiated or reduced.

LATE NOTIFICATION

•     Immediate reporting – 30 days from date of loss is allowed to register the claim

•     Delays in reporting can prejudice the insurer. Insurer hold the right to deem a claim invalid.

FRAUD/EXAGGERATION

•     Inflated values

•     Fabricated loss

•     False documentation

Inflated claims or incorrect information can result in claim rejection or policy cancellation. Honesty is critical

INCORRECT COVER STRUCTURE

If you are unsure whether your policy is properly structed, please review.

THE IMPACT OF DIGITAL INFORMATION

•     Insurers are using automated claims systems, often powered by AI and image recognition, to assess damages and approve claims more rapidly.

•     Fraud Detection – Advanced analytics and pattern recognition allow insurers to flag suspicious claims earlier, reducing losses.

This digital shift is not just about efficiency; it is also about accessibility.

A short conversation today can prevent a major financial loss tomorrow. In times like these, the true value of advice is not a theoretical concept. It is a lifeline.