…and how to avoid it happening to you.
Having your insurance policy cancelled isn’t something that happens for no reason and it’s important to understand why this could happen and how to avoid it. If your policy is cancelled, this can cause all sorts of difficulties and problems in the future when trying to obtain insurance again.
“When an insurance policy is cancelled, many consumers tend to see it as unfair,” says Nthabiseng Moloi, MiWay‘s Head of Marketing and Brand. “This is because they have no fully realised the fact that an insurance policy is actually a contract between two parties: the insurer and the insured. The contract aims to protect the insured against certain risks in exchange for a premium and the insurer relied on the insured to provide an accurate and honest picture of the nature of the risk, based on the answers given to a set of questions.”
The insurer does its best to assess what the risk is and bases the premium on that assessment. It stands to reason that if the risk changes or the insured breaches some of the terms of the policy, it has the option to cancel the policy. If, however, the risk turns out to have been higher than originally assessed, the insurer can void the policy, in which case it is as though it never existed and all premiums will be returned.
By the same token, the insured is also at liberty to cancel the policy if he or she is dissatisfied in any way, or has found a better deal with another insurer. In that case, the insurer might make a counter-offer and if it is accepted, the contract would be amended to reflect the new terms and conditions. If not, it would be cancelled and the insured would enter into a new contract with another insurer.
Most policies allow for a 30-day notice period of cancellation, which gives both parties time to seek a solution. If, however, there has been dishonesty or fraud, the insurer can cancel without notice.
So what would lead an insurer to cancel a policy? There are three main causes for policy cancellation:
Consumers should remind themselves that by behaving in a way that leads to excessive claims does not affect just themselves, but everybody who insures with that company. It is rather like a stokvel member who constantly borrows money from the fund – soon enough, the other members would request that person to leave the group as his or her behaviour is jeopardising everybody else’s chance of benefitting from the communal funds.
If you are ever unfortunate enough to have a policy cancelled and you believe you have been treated unfairly, your first port of call would be the insurer’s own dispute-resolution team. Insurers have a vested interest in keeping their clients happy, after all. In the unlikely event that the matter is not resolved, the Ombud for Short-term Insurance will provide an objective, specialist assessment of your case and offer relief if it is warranted.
Remember, a contract has to work for both parties. Once you have understood that your contract with your insurer is based on a certain risk profile, you will be better placed to act accordingly and the contract will continue to provide the cover you require.