Ombudsman Warns Against Cheap Insurance

May 30 - Recently, South Africans have seen TV ads for a car insurance so cheap, that it seems almost too good to be true.

Carprehensive, underwitten by RMB Structured Products, is being hailed "the affordable alternative", however the ombudsman for short term insurance, Brian Martin, came out to warn South Africans, that cheap insurance "may not offer much protection to consumers and may give a false sense of security."

He opened South African drivers' eyes to a number of shortfalls in the insurance product, as follows:

• Claims are based on the 'trade value' of the car (which is what a dealer would offer as a trade in ). "This may leave a consumer with a large shortfall in the event of loss," he said.
• The policy offers no cover to a consumer for damage to the car which is not assessed as a write-off.  "Before a claim can be made against the insurer, the damage to the vehicle must exceed R40,000 and must be greater than 80% of the trade value," he said.
• Third party claims will only start paying out after R50,000 and won't pay out over R250,000.
• There is no cover for the first two months after signing up.

Carprehensive Reacts

The CE of RMB Structured Insurance, Gustavo Arroya, responded to the ombudsman's claims and said he considered them "neither fair nor accurate".

He said the Carprehensive's premiums were so low because "bumper bashings and fender benders are repaired by the insured."

He also said that the unique terms of the policy were explained in "extensive detail" to ensure that consumers understood what was covered and what was not.  "No effort is spared in ensuring that clients are fully apprised of all applicable terms and conditions," he said.