Expeditious settlement of valid claims stands out as a vital function that reveals the trustworthiness of individual insurers/reinsurers and sheds light on the overall values of the industry. By and large, insurance companies rarely reject or repudiate claims without cause. Several underlying factors contribute to claim repudiations. By understanding these factors, as the discourse in this article will focus on, policyholders can navigate the complexities of insurance claims and proactively expedite the claims management process.
According to the recently published 2022 Insurance Industry Report by the Insurers Association of Zambia (IAZ), the Zambian insurance industry recorded a gross written premium of circa ZMW 6.03 billion in 2022 compared to ZMW 5.34 billion in 2021, representing a growth of 13%. The net claims increased by 20%. Claims recorded in 2022 amounted to over ZMW1.87 billion and ZMW 1.56 billion in 2021. The upward trend in gross written premiums and net claims over the years indicates a growing industry that pays out claims.
An essential principle in insurance is the requirement of full disclosure, commonly called utmost good faith (translated from the Latin term “Uberrimmae Fidei”). Proposers are obligated to provide all information requested by the insurer accurately and to the best of their knowledge. The information provided allows the insurer to adequately assess the risk and alter the policy to meet the client’s needs. However, if a breach of this duty of full disclosure is discovered, the insurer might consider nullifying the contract.
For instance, disclosing pre-existing ailments, including any heart condition, is crucial when applying for medical or life coverage. The life assurance company will need this information to make necessary alterations to the policy. Failure to disclose pre-existing conditions could lead to the denial of benefits in the event of a claim, especially if they had a role to play.
Embedded at the heart of the claims settlement process is the pecuniary concern of premium payment. Failure to meet premium deadlines or adhere to the stipulated payment plan can jeopardise the enforceability of coverage, potentially resulting in the repudiation of a valid claim. It is worth noting that Insurance policies are essentially financial contracts that transfer risk from the policyholder to the insurer at a prescribed fee.
Insurance policies are exhaustive contracts that delineate the scope of coverage and instances where coverage is not applicable. Familiarisation with the policy’s terms and conditions cannot be overemphasised. If the claim falls outside the coverage bounds, it will likely be repudiated. For instance, a common exclusion for motor vehicle insurance, is damage caused by political violence, most common during election periods. Some exclusions, such as the aforementioned political violence example, can be added as an extension to the policy at an additional premium.
While exclusions limit cover, warranties impose specific obligations upon policyholders demanding precise adherence to stipulated conditions. They are included in insurance policies to reduce the likelihood of unfortunate events. For instance, household insurance policies may require the installation of burglar bars to mitigate theft, while motor vehicle policies might necessitate possessing a valid driver’s license. Deviating from these conditions could inadvertently grant insurers grounds for claim denial.
Timely claim notification also plays a crucial role in claim approvals. Insurance companies require timely notification of incidents to allow for loss minimisation and accurate assessment and investigation. Delays in reporting may lead to the rejection of a claim. For example, most motor theft claims must be notified within 48 hours of the incident. Initially, the notification can be made conveniently by call and, subsequently, more formally in the prescribed manner and form.
Underwriter, Klapton Re