adminParadzai Masvingise Correspondent
Over the years, many people have felt short-changed by insurance companies and there has been growing concern on the myth that insurance people are crooks.
“Insurance people, companies, agents and brokers are crooks . . . (Vanhu vemainsurance matsotsi), is a common statement in all spheres of our society. In my experience in the insurance industry spanning over 25 years, I have heard this statement almost on a daily basis. But if everything in the contract is respected by both sides, the statement is false.
In my early days, I wondered why people who felt short-changed would not sue or at least report the errant companies to the regulator in this case the Insurance and Pension Commission (IPEC). They cannot sue or report because legally the insurance company will be correct and just enforcing the terms of the contract.
According to Investopedia, life insurance is defined as a contract between an insurer and a policyholder in which the insurer guarantees payment of a death benefit to named beneficiaries or to the deceased’s estate in the event of non-appointment of beneficiaries upon death of the insured. The interests of the policyholder in an insurance contract must be held supreme.
The rise of the myth
What then gave rise to the myth that insurance people are crooks? This can best be answered by the fact that many times, a lot of people have taken out policies they ended up not benefiting from.
Failure to benefit from the policies can be attributed to a number of factors such as:
Policy lapsing in the event of non-payment of premiums within defined periods. This is the major contributing factor in my view as many will not be aware or simply do not pay attention to the terms and conditions governing the policy.
Many wonder as to why they cannot claim or benefit on a lapsed policy even after paying premiums for close to a year. The reason is breach of contract and the new business strain suffered by the insurer which makes it impossible to return the premiums such as commissions paid to agents, production of policy documents, setting up and maintaining the policy records and so on.
Employers deducting premiums from their employees but failing to remit to the insurer. In this case, a policyholder will get to know about non-remittance either at claim stage or after receiving lapse notifications from the insurer.
In the event that the policyholder was the premium payer and is deceased, it is very difficult for the claimants to believe that premiums were not being remitted to the insurer as deductions will be showing on pay slip hence portraying insurance companies as crooks.
Employers usually enter into an agreement with the insurer for facilitation of premium deductions in return for an administration fee. However, due to cash flow problems, employers will end up diverting insurance premiums back into their own businesses. However, the Salary Service Bureau must be commended for the timeous deduction and remittance of premiums such that it is now the most sought-after stop order.
Uberrima fides — Doctrine of utmost good faith. This principle means that everyone who enters into a contract of insurance has a legal obligation to act with utmost good faith towards the company offering the insurance cover. Simply put, one is required to disclose all material facts as required on application forms. A good example is the question “do you smoke” and if one does not answer correctly this may lead to repudiation at claim stage as insurance companies will often do retrospective underwriting using the death certificate and may discover that the cause of death is smoking-related. Big culprits are the insurance companies’ intermediaries who often complete application forms on behalf of applicants and in most cases do not answer the questions truthfully. If all questions are answered to truthfully, the insurer may come up with the best underwriting decision such as loading the premium for certain hazards or illnesses or even declining the application before policy commencement. This will save the applicant time and money and does not give false hope that one is covered. However, in the case of non-disclosure, the insurer may at times exercise leniency and make an ex gratia payment (out of mercy) or at least refund all the premiums paid.
Loss of values on policies is another major factor that has led the general public to the perception that insurance people are crooks.
Paradzai Masvingise is an Insurance practitioner with vast experience in the insurance industry. He can be contacted on e-mail: [email protected] or app +263772955507.
Online Reporter