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Beware of Fake Motor Vehicle Insurance Companies

Car-Insurance-Scam

There are many reasons a motor vehicle accident or theft claim might fail, from suspect circumstances regarding the incident to key policy provisions being violated (for instance, not having a gear lock fitted when your policy expressly calls for one).

But what if your claim does not pay out because you were the victim of a scam? There are many fake insurance companies in operation, scamming their victims into signing up for a policy by offering ridiculously low premiums.

They purely treat the premiums clients pay to them as income and never pay any claims out. Point in case is Kwazulu-Natal based Model Insurance. Owned by Pieter de Wet, this company has been in operation since 2011.

 

Their website claims: “We offer by far the lowest car, motorcycle and business insurance premiums, so why pay more when you can pay less, save money today and make a difference in your life. We can help.”

But in fact Model Insurance was never a registered insurance company, was never underwritten by a registered insurance company and is not even registered with the Financial Services Board (as is required by the FAIS Act). Its conduct was therefore in complete contravention of the Short-Term Insurance Act.

The company came under investigation when the Financial Services Board started receiving complaints and acted on them by referring them to the South African Police Service. The investigating officer is Lieutenant-Colonel RR Mohan and he has taken several statements from victims.

According to SAPS spokesperson Colonel Jay Naicker, the company has or had 884 clients from around the country. Their premiums ranged between R200.00 and R250.00 per month and were paid into the company’s bank account monthly via debit order.

Naicker commented, “We are in discussion with prosecutors on how we can proceed with this matter. Any other victims out there, or those who can assist police in their investigation, are requested to contact Lieutenant-Colonel Mohan on 079 5000 074.”

The impact on the victims is obviously harsh. Many have motor vehicles that have been standing unrepaired at repairers for months. The SA Motor Body Repairers Association sent an email to its members, advising them to not release any motor vehicles who’s repairs had been authorised by Model Insurance before receiving payment. This was in response to many complaints of non-payment of claims by the “insurance company” to the regulatory body.

So what can you do to avoid the same fate?

  • The number one red flag when considering car insurance is a very low premium. Make sure that the insurance company you are considering insuring your car through is registered at the Financial Services Board.
  • Look at previous claim statistics on the Short Term Insurance Ombudsman’s website, at www.osti.co.za.
  • Do what one should always do with any type of contract: read carefully through the small print.
  • If you are considering insuring your vehicle through a small or unknown insurance company, do some online research first. Utilise websites like HelloPeter.com. You will immediately be able to get an indication of what sort of company you are dealing with.

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