Insurance companies are often accused of not wanting to pay out claims. The fact is that insurers want to hold on to loyal customers, give good service and pay for valid claims. For claims to be deemed valid, it is important that clients adhere to the full disclosure of material facts relevant to their policy.
The most common cause of dispute between insurers and consumer arises at the time of the claim. A significant proportion of claims which are rejected, are due to either alleged non-disclosure or partial disclosure of information. When assessing a risk profile, insurance companies rely on you to make full disclosure on all relevant information. It is of utmost importance to be honest when one takes out any form of insurance.
“Each premium is individually calculated based on risk factors, some of which will be unique to the individual applying for insurance. In an attempt to pay lower premiums, people are sometimes tempted to be economical with the truth or to provide vague responses. For example, a parent might claim to be the regular driver of a car, when in fact they are actually buying the car for their teenage child, in order to avoid paying a higher premium” says Peter Olyott, MD of Indwe Risk Services.
People might innocently fail to disclose a material fact. A material fact is one which would influence the decision making process of the insurance company when determining acceptance of the risk, and in assessing appropriate terms and conditions. When a material fact is not disclosed and the insurer has based it’s assessment and acceptance of the risk on the facts presented, the insurer may, depending on the particular facts, have the right at law to void the policy. This means the insurer can treat the policy as though it never existed and return the premiums to the policyholder or they can treat that portion of the insurance relating to the claim as voidable.
Integrity and honesty are essential in the insurance buying process. “If one’s insurer asks about previous claims or losses, tell them the truth – the last thing one wants is to be caught out in a lie. Honesty is always the best policy and fraudulent claims are taken very seriously by insurers” says Olyott. Fraudulent claims and dishonest actions will not only affect current claims but will also have an effect on all future interactions – including being offered affordable premiums and when applying for insurance from another company. Always remember that Insurers are legally able to share certain client information with each other (in an attempt to reduce fraudulent claims in the industry).
Regardless of how conscientiously the buyer tries to disclose all relevant information at the time of purchase, there might be essential information that they inadvertently leave out. A professional broker will provide you with the right information and guidance when it comes to disclosing important information. “The most important role for a broker in relation to the efficacy of insurance is to ensure that appropriate attention is paid to the terms and conditions of the contract,” says Olyott. Undertaking an appropriate assessment of the insurance contract being offered is a major part of achieving contract certainty,“ he adds. “…..and then one can compare the pricing between different offers “
The aim of insurance is to put one in the same position that one was before an incident or loss. Ensuring contract certainty by fulfilling the terms and conditions (especially material disclosure) will go a long way to ensuring the one receives the indemnity one is entitled to in terms of the contract.
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