If you are an Absa homeowner's insurance client and the company increased your policy value and premiums in December last year without your express permission, you can have the increased portion of your premiums refunded.
In November last year, about 21 000 Absa Insurance clients received letters informing them that they were under-insured on their homeowner's insurance.
The letters stated that unless clients told Absa Insurance within a month that they disagreed with or did not want the higher values and premiums, the amount for which their homes were insured (and therefore their premiums) would be increased automatically.
Personal Finance is in possession of one of the letters, which informed the client that his property was under-insured by 41.081 percent and that his premiums would increase by R1 199.45 a year in December last year.
This is inertia, or negative response, marketing. A company demands payment for goods or services that are automatically charged to you unless you specifically decline the offer. A lack of response from you is taken as tacit agreement that you have accepted the goods or services on offer.
Edwyn O'Neill, the managing executive of Absa Insurance, says the company conducted a study last year to gauge the extent to which its clients were under-insured, because it has experienced an increase in the number of claims submitted in the past three to four years.
"At the claims stage, we often found that clients were under-insured. This placed significant financial strain on, and in some cases led to financial ruin for, clients. The spin-off of an under-insured asset is that the customer is faced with unwarranted financial hardship," he says.
In December last year, O'Neill said that the terms of Absa Insurance's policies allowed it to increase the price and insured value of its clients' homes.
But following a meeting with the Department of Trade and Industry (DTI), Absa has agreed to change the wording of its policies, Ebrahim Mohamed, the chief director at the office of consumer protection in the consumer and corporate regulation division at the DTI, says.
Absa Insurance has also agreed to contact all the affected clients. If their premiums were increased without their express mission, Absa Insurance will, within one year, retrospectively refund the increased portion of the premiums.
"Absa agreed to write to each affected client to confirm that increases in premiums and insured amounts had been implemented as per the client's instructions. The DTI will be monitoring the situation to ensure the consumers' best interests are served," Mohamed says.
Andrew Culbert, the managing director of bancassurance at Nedbank, says it is your responsibility as a homeowner to ensure that your homeowner's cover is up to date.
Culbert says while insurance companies apply annual increases based on market movements over the year, clients should be given the option to decline or accept the increases, or to suggest different values for the insured amount.
If you are under-insured, insurers will apply what is commonly referred to as the "rule of average" when determining your payout. For example, if your home is insured for R500 000 but is actually worth R1 million, there is a 50-percent under-insurance risk. In such a case, the insurer is likely to pay out only 50 percent of your claim.