Market education vital for new wave of insurance users

The 'wealth-effect' created by South Africa's growth economy has resulted in a new wave of short-term insurance users making consumer education increasingly vital, according to leading insurer Mutual & Federal.
 
"It is therefore extremely important that efforts to assist the consumer be firmly entrenched", says Sedick Isaacs, General Manager, Personal Business, at Mutual & Federal. "Understanding policy conditions is always important, but especially so for new users. The consumer has the right to a full explanation of policy terms and conditions by either the broker or insurer", he adds.

Products change and policy wording differ, but experience at a market leader such as Mutual & Federal indicates that four key areas warrant special attention, namely:

1.  Claims procedures
2.  Liability issues
3.  Betterment and indemnity
4.  Changes in personal circumstances
 
Isaacs advises policyholders to read claims procedures carefully and to stick to the process. The consumer should also seek the insurer's guidance when loss or damage occurs. He explains, "It is important to follow the process and make sure the insurer is fully informed. Don't try to make your own arrangements".

A key provision in policy wording is that the client makes no admission of liability or responsibility. 'Liability' means you admit you were at fault and therefore are responsible for making good. Isaacs says, "This issue often arises in areas such as public liability or motor accidents. You may imagine that relatively little damage has been done and it is easier to pay it yourself, only to find that a presumed claim of R5 000 has ballooned to R500 000 because of a complicating issue.

"By admitting liability, you have rendered your insurer powerless. You could be personally responsible for substantial losses. Therefore, make no admissions. Refer the other party to your insurers who will handle the matter.

This can be difficult when you are upset or in a state of shock following an accident. But it's better to say nothing at all rather than say something that could cause complications for you".

On the issue of 'betterment' it is important the newly insured understands the basic principle of indemnity in insurance indemnity means to place the insured in the same position as he was prior to the loss, providing he has fulfilled all policy terms and conditions. However, the policyholder has no automatic right to a better position after claim settlement.
 
Trying to improve your position by intentionally misinforming the insurer or failing to disclose relevant information is a breach of policy conditions and regarded as fraudulent. The need for disclosure continues for as long as the policy is in existence and any change in circumstances requires full disclosure to the insurer. To ensure there are no difficulties in the event of a claim, the insured must inform the insurer of all changes that affect risk exposure. Examples include a change of employment (perhaps from a desk job to an operational job in construction or mining) where the insured has Personal Accident cover, modifications to your car (boosting its performance and speed) and turning your home into a base for a small business.

"Changes such as this," says Isaacs, "may mean additional cover is needed to cater for a new level of risk. If your home also becomes a business location, you may need commercial cover. Ordinary household insurance may not be adequate to provide the correct cover for your circumstances if your stock is stolen or an employee or client suffers loss or is injured on your premises.

Insurance is based on good faith between the policyholder and insurer; therefore it is important at all times to fully disclose any change in circumstances to avoid complications at the time of a claim.