Principles of insurance, claims mgmt

From B4

Excess

An excess is amount payable for each and every loss submitted payable by the insured and is deducted from the claim proceeds. In case of motor vehicle claim this is normally reimbursed to the insured upon full recovery from the guilty party assuming that the accident involves two or more parties.

Subrogation & contribution

Issues mentioned so far relate to insured’s policy and application of indemnity under the respective policy. It could be that the insured has right of recourse against third party in respect of this loss and should he recover he may end up receiving more than the indemnity.

It is only fair that when the insurer has paid a claim to their policy holder they reserve the right to recover from the guilty party since the third party cannot seek to avoid financial responsibilities by virtue of someone having arranged insurance.

In the same vain there are some persons who take out two or more policies with different insurers and hoping to recover the same loss from the different policies hence ending with amount in excess of indemnity limit.

Subrogation is the right of one person to stand in the place of another and avail himself of all the rights and remedies of that other, whether already enforced or not.

As alluded earlier the insured is entitled to indemnity, but no more than that. Subrogation allows insurer to recoup any profit that may accrue to the insured as result of an insured event but is not entitled to recover more than the amount they would have paid out. at is no profit is to be made from exercising their subrogation rights.

erefore in instances where an insurer has applied average as mentioned earlier the insured is entitled to retain an amount equal to share of the risk in respect of the amount recovered.

As regards to ex-gratia payments (payment made out of goodwill gesture) insurer is not entitled to subrogation rights since same is not considered as indemnity.

Conversely, life policies are not subject to subrogation since same are not contracts of indemnity. It therefore follows that if injury or death is caused by negligence of another party, policy proceeds are recovered together with any recoveries that may be made from the negligent party.

Contribution

As with subrogation, the principle of contribution applies to all contracts of insurance with exception of life policies.

Contribution applies where a person has insured identical risks/properties with different insurance companies, or when policies are overlapped. In the event of a loss the amount of the loss is shared proportionately amongst the insurance companies

Contribution can only arise when the policies:

•

Cover the same peril which give rise to the loss

• •

Cover the same subject matter

Are effected by or on behalf

Insured

• •

Cover common interest

Must be liable for the same loss

So the purpose of this principle once again is to ensure that the insured does not benefit from having multi policies covering the same risk with the hope of benefiting from individual claim payments.

Claims

Admittedly each insurance company has its own in-house procedures of handling claims and this write up does not in any way represent these procedures but to merely to give would be claimants a general over view of what insurers would expect.

In the event of an occurrence likely to give rise to claim under the policy there are certain implied or unwritten, express or written duties imposed on insured. is is the “small print” found in the policy wording issued by the insurers.

Unfortunately, due to ignorance not many of us do bother ourselves going through this

To B8