If you were advised not to claim from your insurer for every little thing, you might find yourself scoffing at that advice if you’re paying a monthly insurance premium on your car and household contents.
That’s why you have insurance, right? If it’s a valid claim for a bumper scrape or a shower leak, your insurer will settle it.
But should you have a major claim, or a spate of them, what’s likely to happen is that the insurer will add up your claims over the past three years and if the total is more than, or close to, what you’ve paid in premiums, they will dramatically increase your premium or cancel your cover.
Yes, they can. Mr D of Constantia, 65, emailed me recently, very miffed that his insurer for the past 30 years had doubled his premium and the excess amounts payable in the event of a claim. “In May 2022 we were robbed at gunpoint, tied up and jewellery, phones and cash taken,” he said.
“The claim was close to R800,000 and it was paid. In March last year, intruders unsuccessfully tried to enter the house from the roof — that claim was also paid. Otherwise there were minimal claims,” he said. Then came the shock news that from this month his premium had doubled, from R6,000 to R12,000, and the excess payable on every insured item had doubled too.
“What’s the point of paying premiums to the same company for three decades if, after a major claim, the insurer wants to recoup their money by doubling the premium?” Mr D asked. “Do I have any recourse?”
Well, insurance cover — the premiums, excesses and exclusions — should be a negotiation between the two parties. So I ran Mr D’s case, with a list of his claims for the past three years, past a couple of industry veterans. Both said they wouldn’t take him on. One said she would have cancelled his cover outright.
What Mr D referred to as 'minimal claims' were 19 claims in the past three years, totalling more than R1m
“It’s not only the big claims but the also the frequency of them — he’s claimed for every little thing,” she said. What Mr D referred to as “minimal claims” were 19 claims in the past three years, totalling more than R1m. They ranged from that armed robbery in 2022 and a R72,000 claim for a ripped-out alarm system 10 months later, to a R2,000 shower leak claim and R3,800 for a leak in the sunroom.
There were burst pipes in the kitchen, the garage door motor snapped, a toilet pipe burst and damaged the carpets, reading glasses were accidentally damaged, their DStv system blew away in a heavy storm, and his cellphone and watch were damaged in a fall. In the two most recent claims, the same car was damaged twice, five days apart; those claims totalled R45,000. The experts advised Mr D to get in one year of few or no claims and then renegotiate his premium and excesses.
He approached another insurer in the hope of securing a lower premium, but it was a hard no from them too, because of that “unfavourable” claims ratio. In other words, in a three-year period the claim payouts were far more than the premiums he’d paid. About five times as much, in fact.
Mr D argues, understandably, that the ratio is far lower when his 30-year record with the company is taken into account, but when insurers are alerted by a spate of claims they do their sums on the most recent three-year period and react accordingly.
In 2022, when “Angela’s” insurer did that exercise on her claims, they didn’t double her premiums, they cancelled the policy on her 2007 Honda completely. The 75-year-old pensioner cried foul, telling me she hadn’t claimed on her policy too often. But her claims history, supplied by her insurer for the previous three years, told a different story.
At the end of 2019 she hit a pillar outside her bank; three days later she bumped a glass of milk onto her cellphone; in late October that year she reversed into another car, and two weeks after that she bumped a gate at a medical practice.
Things came to a head in May 2022, when she bashed into various gates and garage walls three times, including twice on the same day. Asked to comment on its decision her insurer, Momentum, told me: “Unfortunately, the policyholder had significantly increased her overall risk profile to the point where we had to make the difficult decision to cancel her policy with us.”
The advice is simple, if a little unpalatable. Before you make a claim, consider your claims pattern in the past three years. If you’ve had a run of bad luck, particularly the expensive kind, think twice about submitting that claim if it’s of the “every little thing” kind.
As Momentum told me at the time: “Clients can ensure a healthier claims history and a low risk profile if they take into consideration the frequency of claims being submitted, as well as the amounts claimed for.”
Another option is to increase your excess to carry some of the loss yourself. I’ve heard from many people who’ve been horrified at being dumped by their insurer after a spate of claims. None of them had any idea that that was a possibility. While many insurers disclose in their policies that they reserve the right to cancel them with 31 days' notice, they state nonpayment as a reason for this — no mention of “overclaiming”. The Policyholder Protection Rules, which insurers must abide by, do not compel them to advise their clients they could have their policies cancelled if they “overclaim”.
So if your three-year claims history looks a bit like Mr D’s or Angela’s, get quotes from other insurers and make a switch. You’ll no doubt pay more in premiums and excesses, but nothing near as high as when trying to get alternative cover after being offloaded. At worst, you could find that every insurer considers you uninsurable.
• Contact Knowler for advice with your consumer issues via email consumer@knowler.co.za or on X (Twitter) @wendyknowler
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