Insurance Terms & Phrases


When you simply abandon or rent/hire out a vehicle or sell a vehicle without having received the money for it or when you simply lend out the vehicle and the other party runs off or disappears with the vehicle-the willing giving up by an Insured of property when a total loss is claimed.

Note that this is NOT covered by Insurance, so make sure you NEVER get into a situation like this.


An Occurrence which produces loss, damage, death or injury and which occur unintentionally and unexpectedly. Alternatively, an unforeseen and unintended event or occurrence.


Normally on vehicles older than 10 years or vehicles that are not appearing in the Mead and McGrouther value book like Imported vehicles, then the Insured obtains a valuation certificate on an annual basis and then it is agreed with the Insurers to Insure according to the valuation certificate.


Instead of an excess which is individually applicable to each and every loss, aggregate excess is deducted from the total of all losses over a specified period of time, and the client is usually only compensated after the full amount of the aggregate is “used up” or exceeded.


Provides that a claim for damages will not be defeated by the contributory negligence of the claimant, but that the damages recoverable shall be reduced by the court to such an extent as it may deem just and equitable having regard for the degree of contributory negligence.


A means of settling disputes legally without going to court where the issue concerns the amount of a claim and not liability. A qualified person or persons whose appointment has been agreed to by the parties involved, will hear the case and give a decision.


Where the sum insured is less than the value of the insured property at the time and place of the loss (value at risk) the Company’s liability is calculated as follows:

Incorrect Sum insured divided by correct sum insured x loss = Insurers’ Liability.


The object of indemnity is to give the Insured, after rebuilding or repairs, as nearly as possible the same as what he had prior to the destruction of, or damage to the property insured. Where the property is improved by rebuilding or repairs, the Insured must contribute towards the costs of rebuilding / repairs to the extent of the improve / betterment. Also vehicles tyres- the portion of the tyres already used are deducted from a claim when such tyres are replaced with new ones.


The main use of this term comes from the application of the contribution condition in the policy; In some instances claims arise where the claimant has two policies covering the same subject matter. Details of the other insurance are normally disclosed on the claim form.

Contribution on the basis of independent liability is governed by the limits of liability under the policies involved in relation to the total cost of the settlement. Contribution may also happen in for example an accident where 2 parties are involved and a Judge apportion the cause of the accident to both parties, example one party had a 70 % involvement and the other a 30 % involvement in the accident.


The first amount borne by the insured for his own account of each loss.


When the Third Party fails to enter an appearance to defend, default judgment may be obtained against him. Where the Third Party elected to defend the matter but loses the case judgment is also given against him. If the judgment debtor fails to pay in accordance with the courts judgment the sheriff is sent to his home to attach his assets/property, thereafter the sheriff will sell the property to satisfy the claim.


“An act of grace” The payment or part payment of a loss when there is no requirement to pay the claim in terms of the policy. This payment is made without admission of liability and without wavering the rights in terms of the policy wording.


Any loss must be entirely fortuitous as far as the person seeking insurance is concerned. Any event that will occur with certainty is not insurable as there is no chance of a loss.


Alternative to an excess.  Example: Franchise amount is R 10 000 and if claim is R 9999,99, then client pays the full claim amount and if a claim is R 10001,00, then Insurers pays the amount from the ground up, from the first cent.


Both parties to an insurance contract are required to observe the contract of good faith. This means that the insurer must not deceive the proposer as to the terms of the policy, which they issue in response to the proposal. The proposer in due course must also not fail to disclose any details which might affect the underwriting of the policy.

It is the duty of the insured to inform the insurer about any material facts which may affect the changes of a loss occurring.


Most insurance policies, excluding Personal Accident, are policies of indemnity. Indemnity means “to place a person in the same (financial) position after an event as he was in before the event, so that he neither loses, nor profits”-subject the Average condition ( if applicable).


A person effecting insurance must have a legally recognised relationship to what is insured.


An insured event is an event that is covered in terms of the policy wording. When we insure be it our property or motor vehicles, we insure against certain occurrences that are covered in terms of the policy. Let’s look at an example, if financial loss is experienced due to one or more INSURED EVENTS taking place the insured will be compensated in terms of the policy. When reading through a policy document it is important to take into account the exclusions listed in that section.  Cover less exceptions, warranties, conditions and exclusions = nett cover.


Anything which would affect the judgment of a prudent Underwriter in accepting, or deciding acceptance of a risk. This applies also after a policy incepts and there are any changes like lending a vehicle to someone else as an example etc etc.

Failure to disclose a material fact could enable Insurers to reject a claim or treat the policy as null and void.


The policy is void from inception at common law where there is misrepresentation, misdescription, or non-disclosure.  This must lie in a material fact.  The entire contract is voidable irrespective of whether the misdescription concerns only one item of the policy, as a breach of good faith goes to the root of the contract and this affects the entire contract.


In liability claims, the question of negligence is of paramount importance. Possibly the definition of “negligence” is of paramount importance.


NEGLIGENCE – the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something, which a prudent and reasonable man would not do”. OR a more simple version; failing to act in what the law considers to be a reasonable manner. In simple Insurance terms, the term Liability means that your negligence is covered (negligence needs to be proven).


This is the time within which one hat to institute legal proceedings against a third party. The period is normally three years and is calculated from the date of the accident until service of summons on the third party. There are certain bodies such as the SAPS, The Defence Force and Provincial and Local Authorities who enjoy special privileges and for whom prescription expires sooner.


The direct cause of a loss without the interference of a new and separate cause. In considering whether a loss has been caused by an insured peril regard must be given to the proximate and not the remote cause of the loss.

“The active efficient cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source.”

Following upon this a further definition:

“The cause is that which is the Effective or Dominant cause of the occurrence – what is in substance the cause – such cause to be determined by common sense:”


A policy condition or warranty whose observance is essential for the enforcement of the contract.


In terms of company policy the policyholders must take all reasonable precautions to ensure the following:

a) Prevent loss or damage.

b) Maintain their property in good condition.

c) help preserving Salvage in the event of a loss.


The value of property as indicated by the current purchase price of a similar article, VAT included.


Whatever is recovered of an insured item or part of it, on which a claim has been paid.


Subrogation is the right of the insurer to take over the rights of recourse to a third party to claim damages from the third party.


When a vehicle is stolen/written off and is still under finance, then the client chooses a similar vehicle to replace that, keeps the Bank Finance contract as is intact and the bank simply makes an inscription on the contract, changing the Vin, Engine and Registration number of the alternative vehicle.


A policy condition, which must be complied with literally for cover to be provided- this is very onerous.

Top tips when choosing an independent advisor

Let’s face it – most of us don’t have the knowledge or experience necessary to navigate the minefield of financial planning, particularly when it comes to risk insurance products such as critical illness, disability, life and income protection.

Even for the more financially savvy, it can be a minefield to try to navigate the interaction of complex financial products. So unless you’re willing to risk your financial future, there are few better suited to the job of ensuring you get your planning right than a professional financial advisor.

“Once you have decided to work with a financial advisor, the real challenge lies in finding the right advisor – someone with the expertise, qualifications, practical experience, service levels and personality to meet your specific needs. That’s why you should try to find someone with whom you can develop a long-term relationship. Only then can an advisor become your financial partner in protecting your family throughout your lives.

The key to finding the right financial advisor is to look for a partner than can help you manage your total risk exposure and financial security – not just purchase insurance,” explains Andre Froneman, product specialist at Altrisk, voted the 2012 Long Term Insurer of the Year – Risk Products (2012 FIA Awards).

The financial advisor you choose can determine the success of your planning efforts. This makes it one of the most important financial decisions you make, so you need to be sure of what to look for. To help you in your decision-making, Altrisk recommends you ask the following important questions when choosing a financial advisor:

Q: Are you independent or tied to an insurer?
A: An advisor tied to a particular insurer will only be able to sell that company’s products, while an independent financial advisor can advise on and sell products from any provider across the market. This allows you to compare a variety of insurance products and decide on the one that best suits your needs.

Q. How much will I pay?

A. When choosing a financial advisor, it helps to understand how your advisor gets paid, because those who secure commissions may apply a different methodology to advisors who work on a fee basis. Financial advisors get paid in one of the following ways:

Commission only: Some advisors only receive commissions from product providers for providing financial services and selling products, such as investments, insurance products, and healthcare funding products.
Commission and fees: Commission and fee advisors may charge you a fee for developing a financial plan for you, and then receive commission when they sell you insurance and investment products recommended in your financial plan.
Fee-only: Fee-only financial advisors usually provide advice or ongoing management of your financial plan. You may find that you need regular advice from your advisor for your business dealings, or you may have a complex financial portfolio that needs regular input, but does not necessarily involve the sale of a product which earns the advisor any commission. However, there is enormous value in your advisor’s time and advice given, and in these scenarios a fee-based system may work best.

Discuss the benefits and disadvantages of all payment methods with your advisor and establish upfront the basis upon which you will work with your advisor.

Q. What qualifications do you have?
A. Ask to see proof of your financial advisor’s credentials. The insurance industry recently formalised qualifications for financial advisors, and you should ensure that your advisor is Financial Advisory and Intermediary Services (FAIS)-licensed. If an advisor is working under supervision it means that they still need to qualify by passing their regulatory exams and will be working under the guidance of a qualified individual. FAIS ensures that there is significantly less room for error and malpractice. As a consumer, you are now better protected as emphasis has been placed on putting client interests first, and ensuring the quality of service and advice.

Q. How do you determine my specific needs?
A. A good financial advisor will look at your needs and potential risks over the long term – assessing everything from your future goals to life cover, critical illness and disability, income protection, retirement, savings, investing, and healthcare funding. They should also look at how your last will and testament interacts with your financial plan.

And remember, just like there is no single product provider that can offer all of the necessary covers in one neat, well-organised and appropriately scoped package, your advisor may also call on specialists to look at specific areas of your financial plan. For example, he may call in a specialist in trusts, or a legal expert to look at your will, or a tax expert to look at the tax implications of your estate. A good advisor will always support the need to bring in specialists, especially with complex portfolios, to ensure that all your bases are covered and all consequences considered.

Q. How will you communicate with me and how often?
Staying in touch with your financial advisor is critical to managing your portfolio and developing their knowledge and understanding of your needs. The regularity with which you meet will depend on your goals. These should be agreed upon with your broker at the outset. If your objective is simply to implement a simple risk insurance solution, such as bond cover and a long-term retirement annuity to supplement your company pension scheme, then an annual update may be adequate.

If you are more goal-driven in terms of your finances – perhaps with aspirations to retire young and wealthy, or to leave your job within five years to start your own business – your needs will be very different.

It is also important to consider “trigger events” that may necessitate action or advice; such as retrenchment, divorce, or additions to the family. Any change in circumstance can alter your risk and should be evaluated as part of your financial plan and strategy.

Q. What claims service do you offer, and what has your claims experience been with different providers?
A. Look for a financial advisor who understands the importance of issues such as service delivery and claims settlement – purchasing an insurance policy should be about more than finding the cheapest rates. Your advisor has a moral obligation to act in your best interests and manage all of your claims on your behalf, ensuring that the process runs smoothly. Find out about their experience with difficult claims or cover disputes, and look at any claims information they may have about different insurers. It’s important to know that the insurer you select has a solid track record when it comes to claims settlement and an ethos of acting in their client’s best interests.

Word of mouth is the best way of establishing your insurance broker’s reputation for service. The role of the financial advisor has become increasingly important as the global economy undergoes fundamental shifts. Now, more than ever, it is vital to know that the person you entrust with your financial future has your best interests at heart.

Article originally published by: Andre Froneman, product specialist at Altrisk

How does your insurer fare come claim time?

Here’s a cautionary tale for those contemplating trading in their sedans for an SUV  particularly a 4×4. It may be just the vehicles image you fancy, and you dont have any intention of taking it bundu-bashing, but expect to pay a relatively high insurance premium anyway.

Short-term insurance is a highly competitive industry, each of the players trying hard to convince consumers that it provides the best-value premiums and that it’ll look after us in our hour of need: claim time.

But how do the companies shape up when it comes to dealing with claims?

Well, the office of the Ombudsman for Short-Term Insurance (OSTI) has, for the first time, provided some insights into just this, by publishing statistics relating to 51 insurers ranging from Absa to Zurich.

Big, small and in-between, their stats, relating to personal lines, are laid bare in the ombudsman’s 2012 annual report, released in Johannesburg last week.

Among the numbers are the number of claims each insurer received, the number of complaints received by OSTI last year, the number of rejected claims “overturned” by OSTI, and the number of complaints received by OSTI per 1 000 claims received by the insurer.

“What is important is the proportion of complaints to this office relative to an insurer’s share of the total claims reported to the Financial Services Board,” says ombudsman Dennis Jooste.

“The clearest indicator of this is the number of complaints to this office per 1 000 claims received by an insurer.”

That’s because that number gives consumers an idea of how many of that insurer’s clients felt that their claims were unfairly repudiated.

In most companies – 38 – it was fewer than five out of 1 000 claims: many insurers had proportionally so few of their claims end up in the ombudsman’s office that they registered as 0 out of 1 000.

They include Ace, Lloyds, NMS, Old Mutual Health Insurance, Relyant and Vodacom.

So how did the industry’s five biggest players fare, in terms of number of claims received last year?

They are Santam (385 449 claims), Hollard (300 635), Absa (286 956), OUTsurance (284 576) and Auto & General (220 930 claims, which include Budget and First for Women).

Santam’s share of claims that ended up as complaints to OSTI was 2/1 000, Absa’s was 3/1 000, Outsurance’s 2/1 000, Auto & General’s 5/1 000 and Hollard’s 2/1 000.

Eight insurers, all with relatively few claims, had relatively large percentages of their claims end up as OSTI complaints, indicating a relatively high level of dissatisfaction among their clients.

They are:

  • Oakhurst: 37/1 000
  • Chartis (now AIG Insurance): 30/1 000
  • RMB Structured: 25/1 000
  • Saxum: 17/1 000
  • Centriq: 16/1 000
  • Lion of Africa: 15/1 000
  • King Price: 11/1 000
  • New National: 11/1 000

The “overturn rate” – an average of 33 percent for the year, 2 percent down on the previous year’s figure – is a little controversial.

First, the figures don’t only relate to cases that were repudiated by the insurer and then that decision “overturned” by the ombudsman’s office on review because the decision was felt to be wrong or unfair. They include any resolution that resulted in some benefit for the consumer which he or she wouldn’t have got without the ombudsman’s intervention.

Discovery Insure’s Anton Ossip said, for example, that of the company’s nine claims that were finalised with some benefit to the client, one involved a claim for a stolen bicycle which was repudiated because it wasn’t specified on the policy.

“It was the correct decision, but we took too long to finalise the claim, so we gave him a gift voucher to apologise for the poor service,” he said.

Discovery’s overturn rate was 36.84 percent, slightly higher than the average rate of 33 percent for the office, for the year.

“But we are very happy for the ombud’s decision to publish the stats,” Ossip said. “It’s a real game-changer for the industry and will ensure that we all strive to increase our standards.

“No one wants to be on the wrong side of the statistics.”

Speaking of which, bearing in mind that average overturn rate of 33 percent, among the companies that had considerably more of their decisions overturned were JDG (Joshua Doore Group) Micro with an overturn rate of 64.71 percent and Relyant (60 percent).

Both are insurance arms of this country’s major furniture retailers, which sell short-term insurance policies on goods bought in their shops.

Vodacom, like JDG Micro and Relyant, had a small number of its claims decisions result in complaints, but the overturn rate was high – 66.67 percent.

With Vodacom, two out of three cases went the way of the consumer; in the case of Relyant, it was three out of five cases; and with JDG Micro, it was 11 out of 17 cases.

It could be that those policyholders – mostly “mass market” consumers – are generally less likely to contest an insurance repudiation.

Insurer NMS had all four of the complaints against it “overturned” or finalised with some benefit to the insured, as did Sasria and King Price, both just one case each.

Both Renasa (48.9 percent) and RMB Structured’s (49.45 percent) overturn rates were also significantly higher than the overall rate, the former having 47 out of 96 cases “overturned” in some way by the ombudsman’s office, and the latter 135 out of 273.

In all, the office received 9 123 complaints against insurers last year, an increase of 1.7 percent over 2011, and resolved claims worth R113.7 million in favour of the insured, slightly down on the previous year’s figure.

As always, most (48.4 percent) of those complaints had to do with motor claims, followed by householders’ (22 percent) and homeowners’ claims (8 percent).

The office’s core function is to consider complaints about repudiated insurance claims fairly and impartially – and it’s a free service to the consumer.

“We should be seen as a consumer watchdog to ensure that fair play prevails,” Jooste says.

“But in order to maintain our unbiased, impartial role, we should not become consumer activists, nor a spokesperson for the insurance industry.”

To contact OSTI, call 086 072 6890. To see all the stats, go to and click on Annual Reports, 2012.

Find out the cost to insure before getting wheels

Here’s a cautionary tale for those contemplating trading in their sedans for an SUV – particularly a 4×4.

It may be just the vehicle’s image you fancy, and you don’t have any intention of taking it bundu-bashing, but expect to pay a relatively high insurance premium anyway.

“Roxanne” wrote to Consumer Alert last week about her insurance dilemma.

“In January I purchased a car and got the financing, no problem.

“At that stage my expense calculation was fine and I was able to afford it.

“One problem was that I had signed the offer to purchase before finding out about insurance. Little did I know that because I got a Suzuki Sx4, it is classed as a 4×4 and the insurance is really high – about R1 000 a month.

“That, along with some personal developments, means I am really struggling with the repayments, so I need to ‘sell it back’ and get a smaller, more affordable vehicle.

“Do you have any advice or could you point me in the right direction?”

Well, no, other than shopping around for a cheaper premium, she’s going to have to sell that vehicle at a loss.

Lesson: Find out what a car is going to cost to insure before you sign the deal.

Don’t just focus on the bank loan repayment figure.

* Wendy Knowler sits on the ombudsman for short-term insurance’s board, as one of four consumer representatives.

The rest of the board is two independent and three industry representatives, and two ex officio representatives – one from the Financial Services Board and one from the SA Insurance Association.

Insurance premiums will escalate says leading insurer

Consumers will have to tighten their already taut belts in 2014 as insurance premiums are set to increase.

This is according to Leon Vermaak, CEO of Auto & General Insurance.

Vermaak says that South Africa’s weakening currency, the number of recent local natural disasters and the increase in vehicle accidents are the reasons behind the rate increases.

He explains: “Auto & General, like all short-term insurance companies, insure their clients against the risk of making a claim. With the increased number of motor vehicles on the road, motorists are more likely to have an accident than in the past. For insurers, repair costs have increased significantly due to the depreciating Rand which impacts the cost of spare parts. In addition, most cars contain advanced safety features and electronic gadgetry – even base model vehicles are fitted with expensive air bags. The price to replace these features and gadgetry is resulting in substantial increases in repair costs for even minor collisions.”

Some people may argue that since their vehicle value is depreciating year on year, their insurance premiums should decrease too. However, Vermaak points out that the cost of repairing a vehicle this year will be substantially more than the same time last year, even though the vehicle’s value may have depreciated by as much as 10-15%. It must also be pointed out that accident claims, where the vehicle is written off, count for less than 10% of all motor claims.

“We update our consumer’s car value on a monthly basis. At premium review stage, customers receive the full benefit of the depreciation in value of his or her vehicle in terms of his or her premium calculation. The effect of this benefit is offset against the factors mentioned above as well as others. Were it not for this adjustment in the value, the premium increase a customer receives would be higher,” explains Vermaak.

Another factor influencing premium increases is that last year, the country was ravaged by unexpected storms and hail the size of golf balls. Auto & General Insurance staff had to work overtime to capture these claims which equated to tens of millions of rands worth of damage.

Vermaak recognises that insurance is a grudge-purchase so it is very often one of the first items to be scrapped from the monthly budget.

Vermaak’s advice for Brokers is, “Remind your customers that not many people have the cash in-hand to replace a stolen car or furniture and appliances ruined in a house fire. Those who think that insurance is an unnecessary cost should consider the costs of not being insured before cancelling their short-term insurance.”

by Leon Vermaak, Auto and General