18 September 2017

South Africa: Knysna Fire Victims Seek Damages After Insurance Shock

Knysna residents whose homes were lost or damaged in devastating fires in June have turned to lawyers after finding out they were underinsured.

The fires ripped through Knysa and Plettenberg Bay, resulting in the deaths of seven people and destroying at least 1 000 homes.

While many breathed a sigh of relief at having their homes and contents insured at the time, it subsequently emerged that things were not quite as smooth sailing.

In some cases, residents found out that their policy was insufficient to meet their needs.

Lawyer Donald Curtis, who is one of around 20 attorneys in Knysna, is dealing with a number of insurance-related cases that he had not seen this time last year.

He told News24 on Monday that most of his cases involved claims for damages against insurance brokers.

'Some brokers sell you a wonderful idea'

Insurance brokers, as financial advisers governed by a code of conduct, had to do a financial needs analysis, ask relevant questions and recommend the appropriate policies.

"Some brokers sell you a wonderful idea. The minute you have signed that policy, they get that commission and you never see them again."

In one instance, a Knysna resident had paid her policy premiums for six years before her house burnt down.

She was charged a penalty of around 14% on her final settlement amount, amounting to a shortfall of around R500 000.

Curtis explained that the percentage was the difference between her current premium and the premium she should have been paying.

"Her policy was for a standard brick and mortar house. Hers was a wooden house," he said.

"The broker sat in her house and had tea and cookies. The wrong box was ticked or there was an error in not stating it was a timber home. That arises from negligence."

'No financial needs analysis'

Another case involved a foreign national who bought a holiday home in the seaside town.

He emailed a broker and a policy was put in place for R1.6m. This was apparently the home's market value.

"There was no face-to-face meeting, no financial needs analysis," said Curtis.

"The actual cost to rebuild a home like that was R3.1m. He is facing a shortfall because the broker failed him."

Residents have also shared their woes about late payouts and partial settlements on various Facebook groups.

Earlier this month, the Knysna municipality held an insurance open day for affected households and businesses.

The aim was to provide support and assistance with claim queries, by engaging directly with insurance companies, the insurance ombudsman and other relevant parties.

Source: News24

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