Orange squeezed on claims backlog

The financial advice ombud has ordered Orange Insurance, for the third time, to pay a long-outstanding insurance claim.

Noluntu Bam, the Ombud for Financial Services Providers, says her latest ruling is the third of numerous complaints she has received about Orange Insurance and its failure to pay short-term insurance claims. This is despite the fact that an investigation by the Financial Services Board (FSB) found that Orange Insurance is liable for these claims.

The insurance policies of about 5 000 people who mainly had vehicle insurance with Zurich were transferred by insurance administrator Fleetsure to Orange in 2008. Orange subsequently claimed that Fleetsure was not authorised to transfer the policies and denied liability for them.

Close to 300 clients are still waiting for Orange Insurance to settle their outstanding claims, most of which are more than a year old.

In February last year, the FSB suspended Orange Insurance’s financial services provider licence. Although the company is still regarded as a short-term insurer, it is not allowed to take on any new business. The clients who were transferred from Zurich to Orange Insurance have since changed to other insurers.

Jonathan Dixon, the deputy executive officer for insurance at the FSB, says the FSB issued a directive earlier this year ordering Orange Insurance to settle all outstanding insurance claims.

“Orange Insurance has appealed that order, and no date has been set for the hearing as yet,” he says.

Dixon says the appeal process has been hampered by Orange Insurance failing to deliver specific affidavits and notices required by the secretary of the FSB Appeal Board. “The process was further complicated as a result of Orange Insurance terminating the mandate of its legal representative in March 2011 and appointing new representatives, with whom matters were only clarified towards the end of May,” he says.

Dixon says the appeal record is in the process of being finalised and the appeal is expected to be set down for hearing towards the end of July this year.

However, he pointed out that the appeal lodged by Orange Insurance against the FSB directive does not free the company from its obligation to pay complainants as directed by the ombud.

“A ruling by the financial services ombud has the same legal standing as a court order, and if Orange Insurance is failing to pay out as per Bam’s rulings, the company stands in contravention of a court order,” he says.

The FSB will not consider allowing Orange to take on any new business until the company has settled all outstanding claims, Dixon says.

In her ruling, Bam ordered Orange Insurance to pay Byron Heath, of Gauteng, R51 333 plus interest of 15.5 percent calculated from February 1, 2009 to the date of payment.

Heath insured his Audi TT coupé with Orange Insurance via Guardian Finance Brokers on October 24, 2007. The car was involved in an accident on November 5, 2008, and Heath submitted a claim.

On November 26, 2008, Orange Insurance authorised repairs and the towing of Heath’s car for a total of R51 333, but it has failed to make good on this payout.

Heath complained to Bam’s office in September 2009.

In September last year, Bam ordered Orange Insurance to pay Innocent Mthethwa R34 000 plus interest of 15.5 percent calculated from February 1, 2009 to the date of payment for the settlement of a claim.

In the first ruling against Orange Insurance in February last year, Charles Pillai, the former ombud, ordered the company to pay Sabastian Chetty more than R104 000, including storage costs, in the settlement of a claim for repairs to his car.

But Orange has yet to pay Chetty, who has had to resort to the courts to try to get Pillai’s ruling enforced.

Chetty told Personal Finance that he has paid thousands of rands in legal fees in an attempt to get his money from Orange, but has been unsuccessful to date.