Insurers can’t hide behind the SIM card

Insurers cannot evade responsibility for cellphone insurance claims simply by swapping SIM cards, according to the National Financial Ombud (NFO). Last year, the NFO handled around 11,000 such cases, with cellphone claims comprising about 4% of the total. The ombud's primary concern is that claims are being denied because the insured device was not being used with the specified SIM card.

This issue often arises from inadequate communication of policy conditions at the point of sale, advises Hannes Bester, adjudication manager at the NFO's Non-life Insurance Division.

A case involving a stolen tablet exemplifies the problem. The insurer rejected the claim because the SIM card had not been blacklisted after the robbery, despite the consumer asserting they were never informed about the requirement. However, Edite Teixeira-McKinon, lead ombud of the Non-life Insurance Division, clarifies that insurers must demonstrate they informed the policyholder about the SIM requirement before policy inception and showed that the handset was not being used with the specified SIM card.

Cellphone insurance can be sold as standalone coverage or as part of a household contents policy. Standalone policies often require the handset to be used with a specified SIM card, a fraud-prevention measure that typically results in lower premiums due to device subsidies from network providers. This requirement also complies with RICA, which mandates SIM cards to be registered to a verified identity and address.

Vodacom, a provider of cellphone insurance bundled with handset contracts, states that customers are informed upfront that cover is tied to the active SIM in the device, ensuring clear terms to avoid disputes.

While mobile operators generally impose stricter SIM requirements due to the bundled contract, household contents policies function differently, requiring cellphones to be listed under portable possessions or "all risks" sections for an additional premium. Ernest North, co-founder of Naked Insurance, explains that cellphone cover can be linked to either a standalone item or a broader home insurance policy, with the latter not necessarily tied to a particular SIM.

Insurers can verify the SIM used with a handset during the claims process, requiring consumers to grant permission for accessing device data, allowing the insurer to determine if the SIM was indeed used with the device. The NFO emphasizes that while insurers are responsible for explaining policy terms, consumers should insist on clear explanations, obtain a copy of the policy, and notify insurers of any changes to the device or SIM card.