BY MTHANDAZO NYONI
MERCY Tshuma is a bitter woman.
A local insurance company she joined 30 years ago has refused to honour her funeral policy claim due to a misspelt name.
“I recently lost my 20-year-old son but the insurance company refused to pay my claim saying his name was spelt wrongly on the policy.
“I have been paying my premiums for 30 years, but the insurance firm dumped me when I needed it most,” said Tshuma.
She is not alone in this predicament.
There has been a growing trend in Zimbabwe where many policyholders have failed to claim their benefits for various reasons.
Dumiso Dlodlo signed up for a funeral policy and enlisted his mother as a beneficiary.
However, upon her death, he submitted her claims but the assurer turned it down.
He was told that his brother, who had also enlisted his mother separately as a beneficiary on his policy, had claimed the benefits.
“They said we can’t claim twice. But when we were paying our premiums, they didn’t tell us that our mother was already covered.
“It’s a fraud! What will happen to the premiums that I have been contributing for many years?” Dlodlo fumed.
“I am convinced that the insurer diverted my contributions to buy assets.
“They invested the money but I got nothing,” he said.
According to the Insurance and Pensions Commission (IPEC), the insurance sector’s combined asset base increased by 16% to $71,32 billion between March 2021 and June 2021.
In 2018, a South African insurance group Momentum came under fire for rejecting a life insurance claim after a man was shot and killed in Durban.
The insurer rejected the R2,4 million payout because it said the deceased had not disclosed the fact that he suffered from high blood sugar.
Again, just over a year ago, Old Mutual faced a public outcry when it refused to pay out benefits of a murdered policyholder because he had not disclosed that he was diabetic.
Both companies were swayed by public opinion to effect the payouts.
According to the Life Offices Association of Zimbabwe (LOAZ), there are several reasons why life insurance companies sometimes deny claims for families.
For instance, major misrepresentations of medical history or current health problems are errors that significantly reduce payments and may result in the cancellation of the policy before payment occurs.
Minor errors, such as a misspelt name or incorrect address, may be used by the insurance company to deny claims.
The most common reason insurance companies refuse to pay is lapsed payments.
LOAZ said most policies do have grace periods or other payment protections in place that prevent the cancellation of the policy without sufficient notice.
Whole life insurance policies often allow the policyholder to use part of the value of the policy to pay premiums when a payment is missed, giving flexibility for policyholders who are struggling financially.
Insurance companies often use unpaid premiums as an excuse for slow payment of benefits.
According to insurance experts, not every death is covered under every policy, and insurance companies act in bad faith when they limit the type of death that is covered under the written policy.
Some companies will exclude death benefits for people who engage in dangerous activities, or put themselves at risk on a regular basis.
There are only two causes of death for which an insurance company can deny benefits.
The first is murder committed by the policyholder to cash out the policy.
Second, suicide is generally excluded from all policies.
Also when the beneficiary is unclear or unavailable, the insurance company will not make a payment on the policy.
“The policy must have accurate information about potential beneficiaries, and those beneficiaries must be updated to reflect changes in life status.
“For example, policyholders must change the name of their spouse on the insurance documents or add the names of their children in order to receive prompt payment,” according to Law Office of Matthew L Sharp.
Hippo, a South African insurance company, says before one signs up on the policy, it is important to read the fine print of your contract and make sure you understand what is expected from you.
Robson Dube, a pensioner, said there was a need for insurance companies and policyholders to be open to each other.
“People need to be educated on some of these things. Communication and openness is key,” he said.
LOAZ secretary-general Mavukeni Rufai urged policyholders to pay their premiums to avoid their claims being rejected.
“But what is important is when you get a policy with some life insurance companies, talk to them,” Rufai said.
“Communicate so that when there is a need to make arrangements you can make the arrangements and they can talk to you and see how best to make sure that your policy remains in the books.”
IPEC director insurance and micro-insurance Sibongile Siwela said an insurance policy is based on an insurance contract where the policyholder agrees to pay regular premiums for the term (duration) of a policy in return for indemnification or benefits payment in the event that the insured event materialises.
“The contract further states that if the policyholder fails to pay premiums as per the terms and conditions of the policy, the policy lapses and premiums are forfeited,” Siwela said.
“An insurance policy is different from a savings arrangement where an individual deposits money with the objective of keeping it and withdrawing it in the future.”
Siwela said a grace period is the period allowable after the premium due date has passed in the hope that the policyholder will fulfil his or her obligation of paying the outstanding premium during the grace period.
The Insurance Act [Chapter 24:07], provides for different grace periods allowable for a policy before it lapses.
This period is premised on the duration that the policy has remained in force, she said.
“For instance, for funeral policies, this is further expanded in the schedule in the same Insurance Act, which prescribes the period within which the funeral policy remains in force where premiums have not been paid,” she said.
Rufai said irrespective of what is happening in the economy, the insurance needs remain.
“We need to make sure that we cover ourselves against unforeseen circumstances,” he said.
“It doesn’t matter whether we have got a Zimbabwe dollar or US dollar that we are using. It doesn’t matter.
“The insurance need remains because every day we have babies being born.
“Once that baby is born, they need to be covered because we don’t know whether the mother is going to be alive tomorrow or in two years or five years.
“We don’t know whether the breadwinner is going to be available to take care of that baby.
“The need for us to be covered remains.
“Similarly, the government will make sure that you don’t travel on the road without an insurance policy for your motor vehicle.
“That’s a requirement. But when it comes to life, retirement, funeral, those are your personal responsibilities.”
Rufai added: “You might disappear from the earth and leave babies that are very young who might not be able to take care of themselves and the fulfilment of insurance is to make sure that those people as long as they are covered will be able to look at life and proceed and be able to do great things in their lives.
“Same thing on retirement, it is a certainty as long as you are alive.
“You will one day reach the age of 60 and you might not be able to work for yourself.
“So in the 40 years that you have been employed, it’s a requirement that you set aside some money that you can spend when you retire.
“Use that money to fund your livelihood and pay for medication because when you get to that age you are prone to suffer from many diseases.
“All those medical solutions require funding but if you have not set aside something to look after you when you retire you might have real problems.”
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