The newly established National Financial Ombud Scheme of South Africa has released its first annual report. Its findings reveal valuable insights that can help clients prevent claim rejections in future, and show that intermediaries matter more than ever.
The first annual report of the newly established National Financial Ombud Scheme of South Africa (NFOSA) was released in June, covering the period from 1 March to 31 December 2024. The ombud is an independent body that resolves complaints brought by consumers against South African financial institutions. During the period under review, 9 289 cases were closed, with 12% of findings in favour of policyholders (complainants) and the remaining 88% in favour of insurers.
While this may suggest a high level of fair decision-making from insurers, the report highlights key areas where brokers and clients can improve understanding and disclosure. Notably, the overturn rate – or the resolved ratio (the number of cases where the ombud’s intervention led to a change in the original decision of the insurer) – increased slightly from 16% in 2023 to 16.5% in 2024, resulting in payouts of more than R100 million to policyholders.
Let’s take a closer look at trends in Personal Lines, which saw the highest number of complaints, along with some noteworthy case studies and key takeouts for brokers.
Motor insurance: Honesty still the best policy
Motor insurance remains the largest source of complaints, making up 42% of referrals in 2024. Most disputes stemmed from rejections due to policy exclusions, and especially for claims due to accident damage.
Case study: Material disclosure
A stolen vehicle claim was rejected after it was discovered that the insured had incorrectly listed himself as the regular driver, instead of his 21-year-old son. The insurer argued that they would not have underwritten the risk had the correct driver been disclosed, voided the policy, and refunded premiums.
The NFO upheld the insurer’s decision, citing material misrepresentation. They commented:
“A material misrepresentation can have dire consequences for policyholders, especially at a time when one is relying on the policy to perform, which is usually when one has suffered damage or a loss.”
Key takeout: Full disclosure is essential, especially when it comes to underwriting. While it might seem like the theft had no bearing on who the regular driver was, non-disclosure of a material fact rendered the policy invalid.
Buildings (Houseowners) insurance: Nature vs neglect
Building insurance generated 27% of all Personal Lines referrals. Most complaints arose from damage caused by acts of nature, with claim rejections largely due to gradual deterioration, wear and tear, lack of maintenance, or defective design.
Case study: Wear and tear
The insured submitted a storm damage claim, which the insurer rejected due to poor roof maintenance and gradual deterioration. The policyholder submitted invoices to support the claim, but they only related to painting, not roof repairs. The NFO upheld the rejection.
Key takeout: Policyholders often overlook maintenance clauses and gradual deterioration exclusions in their policies. Brokers play a key role in reinforcing the importance of proactive home maintenance and clear understanding of these terms to avoid disappointment at claims stage.
Contents (Householders) insurance: Know what’s covered
Under Contents cover, the most frequent complaints were for theft and burglary (33%), followed by accidental damage (25%), power surge (21%), and acts of nature (9%). Again, many claims were rejected due to wear and tear, lack of maintenance, or gradual deterioration.
Case study: Insurable interest
After a burglary, the policyholder claimed for items belonging to her adult children and a laptop issued by her employer. They also claimed for damage to the alarm system. The insurer only covered items belonging to the policyholder and rejected the rest, citing lack of insurable interest. The NFO agreed, adding that the alarm system damage fell under buildings cover, which the insurer did not underwrite.
Interestingly, the NFO clarified that items purchased for the children before they became financially independent would still fall within the policy cover.
Key takeout: Clients must understand that their policies cover only items in which they have an insurable interest. Adult children living at home should be co-policyholders or have their own insurance. Employers’ assets and building-related fixtures are not typically covered under contents insurance.
Roadmap for improved outcomes
The NFOSA’s first report is not just a record of complaints, but a valuable roadmap for improved outcomes and better conversations. It shows us where misunderstandings happen, where policyholders feel caught off guard, and where expectations can be better managed. And this is where intermediaries shine.
By bridging the gap between policy wording and real-life understanding, brokers are uniquely positioned to prevent disputes before they occur. Whether it’s ensuring proper disclosure, educating clients on exclusions, or clarifying insurable interest, the broker’s role remains particularly relevant.
With complex policy documentation and growing digital platforms, the human element remains crucial. Brokers bring clarity, context, and compassion to conversations that would otherwise feel transactional.
The NFOSA data reminds us that the real opportunity lies not only in correcting mistakes but in guiding clients toward informed decisions, before a claim even arises. That’s the clear value and power of advice.