Compensation rules

When you hear the word “fine print” you would more than likely associate it with an insurance policy!! However, if we reflect on real life situations, we enter into contracts, many times in any given day, which are either subject to written conditions or implied conditions and these can all be considered as the “fine print.”

Yet we generally associate “fine print” as something negative when matters that concern insurance arise and the public is conditioned to think that the insurance company seeks out the exclusions or “fine print” in the policy to deny the payment of legitimate claims. While it is true that some companies go to extraordinary lengths to find reasons for not paying it is also true that the majority of companies in our market do not behave in this manner and it really depends on the bona fides of the management and promoters. This is no different from any other field of business or profession and it really comes down to values and good business practice. The insurance business is one that the public loves to hate and that is generally the case the world over. The daily payment of legitimate claims to the many satisfied customers is not news and quite rightly so but the relatively small number of claimants who experience problems can easily have their matters ventilated in the media and so reinforce the widely held negative view of the insurance industry. Think of the banking sector. Does anyone read the loan agreement and all the clauses? Absolutely not. The borrower is only interested in the fact that he/she has qualified for the loan and the only concern is the monthly repayment amount and when can the funds be accessed. Concern over the interest rate or the many conditions? hardly likely!!

Think about the mortgage on your house. Have you ever read the mortgage deed? Hardly likely. It is written in a language that it is beyond the comprehension of the ordinary man or woman and generally it is given to you to read in an office and you must sign it within minutes. Your only concern is that you want to close the transaction and upon signing be able to forward the funds to the seller so that you could have title to your property but it is totally impossible to understand what you are signing let alone within a few minutes. That is the reality!! What it tells you is that in any field of endeavour , there are terms and conditions, clauses and covenants and much of this is wrapped up in legal language that require lawyers to interpret. It can be said that the system makes work for the lawyers. The insurance business is no different. The legal language has been tried and tested in the courts for centuries and there have been many decided cases that have set precedent for the insurance business. However, we live in an ever changing world and there are situations that may occur that were never considered by the framers of the insurance contract. This is where some difficulty will arise and a determination has to be made whether what happened could be considered as covered under the policy.

For example, the 9/11 event in the USA is one such case in point. The owners of the Twin Towers are in Court having brought a lawsuit against the insurance companies since the insurance industry view the occurrence as a single event and will pay only one loss. On the other hand, the owners hold the view that there were two claims as there were two (2) separate events. The judge has ruled at first instance that there were two events but the matter is under appeal. In this case, the major insurance groups in the world are involved and the stakes are very high — the difference between US$3.5 billion and US$7 billion. It was held that this event constituted an unusual occurrence not envisaged by the insurance companies. Insurance companies must now limit their ex-gratia settlements since the international reinsurance community want to see a reduction in the incidence of these payouts. If local companies want to pay a claim which is not covered under the policy they must do so from their own resources unless they obtain prior consent from reinsurers. The international insurance and reinsurance community will honour legitimate claims but are less willing to consider claims outside the scope of the policy since they feel that insureds must carry their share of the burden and don’t expect compensation when no legitimate expectation exists.

For this reason, there is likely to be less “easing up” and as the world moves forward countries and their peoples must become more responsible and shoulder their responsibility. Take for instance the recent report on illegal drag racing. The police know of drag racing but no action was taken either on the grounds of lack of manpower or that it would be too difficult to prove the case in court. People were injured and the problems of compensation come to the fore. The policy excludes such events. Insurance policies do not cover every eventuality and there are reasons for that. Dangerous sport for example, bungee jumping and sky diving are excluded from life policies for good reason. Drag racing and  rallying, for instance, are excluded in motor policies and many legal issues will arise. This is where responsibility comes in and the simple answer is that everyone must behave as though he/she has no insurance and to exercise due caution. Taking out an insurance policy should not be the passport for reckless behaviour. This is where the fine print kicks in and it would serve us well to appreciate this first principle of risk management. However, we are quick to beg for an “ease up” — overlook the blatant disregard for policy conditions and exclusions. You can see it in the PH driving and the open soliciting for passengers and the sad part is that the public is only too willing to travel with the PH car until there is an accident!! The fine print is there to deal with these excesses and abuse.
E-mail: daquing@cablenett.net