IN two days’ time we are crossing into a new year. In the midst of a hype of activities going on, I wish to end the 2015 episode on this platform by encouraging readers to renew their insurance.
The intricacy of insurance is in its uncertainty. A customer can religiously be renewing his or her insurance for a long time, but may miss once to renew it only for the insured risk to occur. This is painful.
A friend of mine was a faithful client who maintained a motor insurance policy for a long time without being involved in an accident. It happened that in this particular year he kept on procrastinating to renew his policy as he was busy with work.
Alas, he was involved in an accident and his vehicle was smashed beyond economic repair. He asked me if I could aid and I told him that the only help I could give was futuristic, i.e. he should always put a reminder for the renewal of his policy or negotiate with the insurer for an automatic renewal unless he advises otherwise.
Though this sounds discourteous, insurers will agree with me on the limited options in such cases.
Theoretically speaking, a loss after renewal cannot be paid although there could be reasons to accommodate some which is not the topic of our discussion today.
A contract of insurance has a period called policy period during which the insurance applies. Once this period expires the insurer’s obligation to pay claims ends unless the customer renews their policy.
It is interesting to note that the insurer is under no obligation by law to remind the customer that their insurance policy is coming to an end.
However, out of good practice and customer service insurers normally send renewal reminders commonly known us renewal notices way before the expiry date.
In general insurance, contracts of insurance are typically 12 months while in life insurance some contracts run for longer periods.
Renewal reminders are universally sent about six weeks before the expiry date. A renewal notice is an invitation to offer by the insurer to the customer.
The customer is thus required to inform the insurer that they will renew their policy by way of signing a copy of the renewal notice or payment or any form of written instructions.
Verbal instructions may be used, but the obscurity with such practices is the inability to provide proof.
Of course insurance is based on utmost good faith but, unfortunately, one party may turn their back on such instructions.
For example, the insurer may refute having received instructions or the client may deny having issued instructions to renew. The finest is to have written instructions.
The renewal exercise gives the customer an opportunity to evaluate the service they have received from the insurer and if unsatisfied they are free to shop around to get the best possible service.
The customer is also required to review the sum insured or limits of liability.
Under a motor policy, for example, the customer should factor in wear and tear so that they reflect the appropriate sum insured.
Many times customers overpay premiums because they have not thought through such factors.
For motor vehicles, insurers will only pay up to the market value or sum insured whichever is less.
This means that if someone insures his vehicle at K30, 000 and at the time of the accident the vehicle’s market value is discovered to be K20, 000, the insurer will pay the insured based on the K20, 000 value.
This makes sense because the insured is able to buy another vehicle at that amount. However, these are usually heated arguments in practice.
The insured will demand to be paid the sum insured while the insurer will insist on paying the market value.
The tiff raised by the customers is that they paid premium based on the sum insured.
I remember one client who insured a vehicle at over K200, 000 but after the accident Toyota Zambia valued the vehicle at about K20, 000.
The insured could not just believe what Toyota Zambia had done and probably thought the insurer connived with them.
The insured argued that they were not told of the correct value by the insurer, but this was a fleet where insurers do not inspect vehicles.
Suffice it to state that insurers are not experts in valuating vehicles. Based on experience and the ‘sixth sense’ they may advise especially where values are too extreme.
To determine the market value insurers will rely on other experts such as dealers, motor assessors or open market values from showrooms.
In the aforementioned case, a negotiated amount was paid and the appropriate refund was made to the client and it was followed by a revaluation of the entire fleet to determine the reasonable market value.
For more information on insurance please visit your nearest Bookworld shop or at Radio Christian Voice and get a copy of ‘Basics of Insurance, The Zambian Experience’ book or you get in touch through contacts below.
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On a concluding note, please remember to display your insurance disc to avoid being victimised by the police.
You may wish to recall that with effect from Friday, January 1, 2016, all motorists will be required by law to display insurance discs failure to which they will be prosecuted.
I wish you a prosperous new year.
Comments: webster@picz.co.zm or webster_tj@hotmail.com or on face book search for Insurance Talk-Zambia page or call/text 0977 857 055
(The author is a chartered insurer with more than 11 years industry experience)