Policyholder’s perceptions that insurers attempt to find reasons not to pay claims is obviously a concern for the industry. In many instances this point of view is based on expectations by a policy holders misunderstanding about the meaning of paying claims in ‘good faith’.
This belief in good faith by an insurer suggests to a policyholder that they if they are making a bona fide claim the insurance company will pay it.
Reality is, when it comes to an insurance policy, ‘good faith’ refers to meeting contractual obligations.
A policy holder’s belief that insurers will pay claims in the event of a fire or flood creates big problems between these expectations and real life. In reality most people do not read the small print – the policy has conditions that the policyholder is obligated to. These conditions and warranties must be met to receive a pay-out. Common sense and loyalty mean nothing. Policyholders are made to feel like any payment is reluctant.
A bigger issue is the failure of most Policyholders understanding of what they have actually purchased in a policy. This leads to ambiguity and disappointment when a claim is rejected.
Remember in cases where there is disagreement, there are independent Insurance claim management companies to help with Fire Claim Help Damage or Water Damage. If these Loss Assessors cannot get insurers to see sense there is always the ombudsman route who adjudicates between the parties.
Failing to educate policyholders as to the importance of disclosure at the inception stage is also the responsibility of the Insurer. If there is a material non-disclosure the insurer is quick to decline a claim, or even refuse cover altogether and refund the premium. This has long term implications for a policyholder who would have to declare this on every future proposal form to an insurer which will limit their rating.
To meet the expectations of policyholders and their needs at claims stage, products need to be more straightforward and transparent to be easily understood. A policy proposal form should be clarity assured and there should be better translation of the implications of elements such as under Insurance. This process is unnecessarily over complicated and insurers simply exacerbate the situation when policyholders don’t get what they expect, mainly because they didn’t understand what they were purchasing in the first place. Many policyholders would rather pay a bit more knowing that they are covered properly.
If more insurers chose to simplify products and offer more comprehensive cover across the board, they would generate better premiums because they would be rating the correct risk.
Claims could return to the good old days when they were paid in ‘good faith’ because policyholder’s entire circumstances were taken into account. The industry has become obsessed with price and relies on clever small print and mistakes at proposal stage to remove risk. The current approach cannot continue if Insurers want to lose the stigma of taking their money and running.