Owning a vehicle provides convenience and mobility, but it also comes with financial risks. For this reason, many South Africans rely on vehicle insurance to protect themselves against losses resulting from theft, hijacking, accidents, or liability for damage caused to others. Whilst vehicle insurance can offer protection for what many consider their most significant asset, claims can sometimes be rejected when policy requirements are not fully understood or adequately complied with.
One condition that frequently appears in vehicle insurance policies, particularly for high-value vehicles, is the requirement for an approved tracking device. There may even be instances where more than one tracking device is required, depending on the value of the vehicle and the risk posed to the insurer. These devices assist insurers in recovering stolen vehicles and reducing losses.
The Office of the FAIS Ombud, however, continues to receive complaints where consumers only become aware of this specific requirement when a claim is rejected due to non-compliance with these tracking device requirements. In many cases, policyholders indicate that they were not clearly informed about the exact specifications or functionality required for the tracking device. This not only highlights the importance of proper advice and clear disclosure from Financial Services Providers (FSPs) when policies are being recommended, but also the importance of consumers empowering themselves regarding this and other policy terms and conditions.
In a recent matter considered by the Office, a consumer insured a Toyota Hilux under a business insurance policy. Although the vehicle had a tracking device installed, the device did not meet the insurer’s required specifications for tracking and recovery functionality. When the vehicle was later stolen, the insurer rejected the claim on the basis that the policyholder had not complied with the tracker requirement.
The financial services provider argued that the consumer had previously been informed about tracking device requirements in earlier policies and was therefore aware of the condition. However, the Office found that the documents relied upon by the provider related to earlier stages of the policy and did not specifically address the vehicle that had been added to the policy at a later stage. As a result, the Office determined that the provider had not adequately advised the consumer about the specific tracking device requirements applicable to the newly insured vehicle.
Financial services providers are required to disclose all material terms and conditions of a policy so that clients can make informed decisions. This includes clearly explaining any requirements, restrictions, or conditions that may affect whether a claim will be paid. Without proper disclosure and advice, policyholders may unknowingly fail to comply with important policy conditions.
In this case, the Office recommended that the matter be settled, and the consumer ultimately received a full settlement of R820,000.
Cases such as this demonstrate how misunderstandings around policy conditions can lead to significant financial consequences. Both consumers and advisors have a role to play in ensuring that insurance cover functions as intended.
Lessons to Learn: What to Do Before Insuring a Vehicle
- Confirm tracker requirements – Ask your advisor whether your vehicle requires a tracking device and what specific device and functionality are required by the insurer.
- Ensure your provider is licensed – Always verify that the person or business providing advice or selling insurance is authorised as a Financial Services Provider with the Financial Sector Conduct Authority (FSCA).
- Review your policy documents carefully – Ensure that all terms, conditions, and special requirements relating to your vehicle are clearly stated in your policy documentation.
- Verify installation and compliance – If a tracking device is required, confirm that it has been installed correctly and that it meets the insurer’s specifications.
- Understand your responsibilities – Policyholders must comply with all policy conditions. Failure to do so, even unintentionally, may result in a rejected claim.
- Check each vehicle separately – Tracker requirements may differ depending on the type and value of the vehicle insured.
- Keep records of communication – Retain emails, policy documents, and installation certificates as proof that policy requirements have been discussed and complied with.
By understanding policy requirements and asking the right questions before purchasing insurance, consumers can better protect themselves and ensure that their vehicle insurance provides the cover it is intended to deliver.