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•It’s your right to know –experts
By Henry Uche, [email protected]
Facing a term insurance claim rejection cannot only be distressing, but frustrating, particularly when the policyholder is the financial provider for the family. In some cases the policyholder might not be present to address a denied claim, but it’s vital to understand and avoid common pitfalls that can lead to insurance companies delaying or denying your claims.
In Nigeria like in many African countries, one major factor in insurance contract that makes potential and prospective policyholders quiver is the fear of whether or not the insurer would do the needful (pay claims) when the need arises as and when due.
However, Daily Sun investigations revealed that policyholders more often than not are to blame when underwriters delay or deny them compensation. In different chats with insurance experts, it was summarily confirmed that failure to ask critical questions and seek clarifications from inception are the reasons policyholders or beneficiaries (in case of Life insurance) are the reasons (why) claims are delayed or outrightly denied.
Tips to avoid fallouts with insurers
First, failure to ask questions and seek clarification from the insurer or their accredited agents from inception is a monumental error on the side of policyholder. What one does not know or understand clearly is often a cause of problem to the person either in the short or long run. This dearth of knowledge could even be used against the person/s involved because the judge would tell you, “Ignorant of the law is NOT an excuse.” Thus, it’s very essential to ask every questions when and where necessary no matter how irrelevant they may sound in the ears of other partners in the business.
Inaccurate Insurance Information: Many people are in the habit of supplying inaccurate information/data about themselves whenever they fill in official documents. The reasons for this dubious act are not far-fetched. Some are owing to -Fear of the unknown- However, Insurers are entitled to deny a claim — even a legitimate one — if the policyholder included incorrect information in their original insurance application (so long as that information is relevant to the insurer). This is applicable due to the fact that the insurers could have rejected the application for insurance coverage to begin with, had they known the “correct” information.
For instance, suppose you did not include complete information regarding your auto accident history. Had the insurer known that you were involved in more accidents, they might not have extended coverage to you — as such, they could use this to deny your claim and argue that your insurance coverage is null and void.
Coverage exceptions
Every auto insurance plan for instance is different, though there are some common, shared exceptions that tend to be included in most plans. In any case, where the insurance company believes that an exception applies, they will generally argue in favor of that exception — this is also likely in scenarios where the insurance plan language is “ambiguous.”
For example, suppose that your insurance plan includes an exception for “damages caused by an ‘Intentional act of the driver’, it may be silent,” however, on damages caused by an intentional act that was necessary under the circumstances (i.e., merging into an adjacent lane suddenly and at a dangerous speed in order to avoid an unforeseen road hazard).
The insurer may attempt to argue that the ambiguity should be interpreted in favor of the exception. Though in some climes, ambiguous language in an insurance contract is interpreted in favor of the policyholder. This puts you — the policyholder — at a distinct advantage when arguing against an exception to coverage.
Less ambiguous coverage exceptions may seem insurmountable at first instance, but they can also be challenged. In some cases, a coverage exception may be considered unenforceable by law (for example, due to it being fundamentally unfair. Thus, exclusion clauses need to be factored. Hence every property insurance policy comes with its exclusions. If the cause of your property damage is excluded from coverage in your policy, then you can expect your claim to be denied.
Excessive delays
Delaying the submission of your claim for too long, or delaying other aspects related to your claim (i.e., waiting too long to see a experts like a physician or loss adjusters after a car accident for instance) can be used as a justification for insurance denial.
If you wait too long before securing medical attention, for example, then the insurer may argue that your injuries were exacerbated as a result of the delay. They may argue that they cannot be held liable for damages that are not directly linked to the accident, and that were caused by you — the policyholder — failing to act with immediacy. All insurance companies have timeframe every insured person is legally bond to report incident/s covered, failure to adhere to the set time may lead to story that touches the heart.
Fraud concerns (claims without substantial material facts/ questionable claims
Fraud is a serious concern for insurers, and they have their eyes wide open when evaluating a claim submission. For instance, suppose that you are involved in a serious car accident, the insurer asks you how fast you were driving, and you say you were traveling at the speed limit (i.e., 50 miles per hour). As the insurer further investigates the case, however, they obtain video footage showing that you were traveling at 70 miles per hour at the time of the accident — in other words, you were over speeding.
Though your speeding was minimal, and though the incorrect information could be due to a memory lapse, your insurer may attempt to paint it as “fraudulent.” In other words, they may attempt to argue that you are submitting an exaggerated claim to secure damages.
For this reason, it’s critical that you consult with an experienced insurance claim consultant like a lawyer for guidance. Your attorney will prevent you from disclosing any information that could be inconsistent with the facts and will ensure that all communications with the insurer are supported by the evidence — that way, the insurer will not have an opportunity to challenge your claim on the basis of fraud.
Insufficient documentation
Insurers often deny claims based on inadequate or insufficient documentation supporting the claim at issue. For instance, if you are injured in a car accident, then your insurer may expect a complete record of the accident (including police records), medical documentation relating to your injury and treatment (and related injuries in the past), employment records linked to any vocational difficulties that you may be having as a result (i.e., career challenges post-injury, need for time off, etc.), and more.
Many claims are submitted without a comprehensive documentary record in support of the claim. Insurers deny such claims easily on this basis. This can delay the processing of your claim and create additional barriers.
One of the responsibilities of an attorney is to help you identify, gather, and submit the necessary documents. With the assistance of an attorney, you can ensure that the submission is complete and maximize the likelihood that the insurance company pays out for the claim.
Loss of insurance policy document and failure to notify the insurer of circumstances that thwarts T&C
Every policyholder is by the provisions of the insurance laws and regulations bound to notify the insurance company of any incident leading to loss of any insurance contract documents, or any other circumstances that may alter the agreed Terms and Conditions (T&Cs). This is very important for the insurance company to take necessary decisions even in favour of the insured. But failure to do this along the line may may cause some friction in process of making claims.
Irregular premium payment:
Daily Sun investigations revealed that four out of 10 policyholders are inconsistent in paying premium. For whatever reason, it’s a breach of contract, an act that undoubtedly has grave consequences. In this manner, the policyholder should know (without a prophet) that he would have problem with the insurer when the need rises having defaulted in payment premium which is his/her primary obligation in the contract.
When The Claim Violates Public Policy and Sensibility:
Some Claims are honestly against public policy and sensibility. To avoid this, the insured should seek advise from experts to avoid squabbles with the insurance company.
When Notice Is Not Given At All:
Some Policyholders funnily but ignorantly awaits the their insurers to visit them with compensation package when incidents covered occur, even without notifying the insurance company. This is not only ludicrous but lugubrious. There is no how the insurance company would know what happened to the policyholder without being notified. Note, the notice to insurance company must be Accurate, timely and relevant.
If the Insurance Contract Is Illegal:
In cases where supposed policyholder approaches an insurance company for claims payment, the insurer may deny him/ her compensation on grounds that the policyholder entered into an illegal contract with them through the wrong hands (agents). It’s often observed that most people fall prey into the hands of hawks and other predators (claiming to be genuine insurance agents working for registered insurance companies. In such case, the self -acclaimed policyholder would be denied attention.
When there is no insurable interest in case of life or a breach of utmost good faith or fundamental term of the insurance policy. When the policy holder did not pay premium in line with Section 50 of Insurance Act 2003 (No premium, No cover).
It should be noted that Section 55(2) of the Insurance Act states that, where there is a breach of a warranty or condition of the contract, the insurer shall not be entitled to repudiate the whole or any part of the contract or any claim on the grounds of the breach unless; (a) the breach amounts to fraud; or (b) it is a breach of a fundamental term of the contract. (Section 55 (5) of the Act defined the Fundamental term of the contract as a warranty, condition or other term of insurance contract which is regarded by the insurer in accepting the risk and fixing the amount of premium).
Section 55(3) of the Act states that where there is a breach of a material term of a contract of insurance and the insured makes a claim against the insurer and the insurer is not entitled to repudiate the whole or any part of the contract, the insurer shall be liable to indemnify the insured only to the extent of the loss which would have been suffered if there was no breach of the term.
While Section 55(4) of the Act states that, “Nothing in this section shall prevent the insurer from repudiating a contract of insurance on the ground of a breach of a material term before the occurrence of the risk or loss insured against.”
Thus, the insurer based on this section is allowed to repudiate a contract of insurance on the ground of a breach of a material term before the occurrence of the risk or loss insured against, not after the occurrence of the risk or loss insured against. The law frowns at repudiation of a genuine claim by insurance company. Claims are not to be repudiated, but the contract of insurance can be repudiated on the ground of a breach of a material term before the occurrence of the risk or loss insured against.
More so, Section 70 (1) (a) of Insurance Act 2003, requires the insurance companies to settle all admitted claims within a maximum time frame of 90 days, and where claims are repudiated, the insured should be communicated by the insurer within 90 days from the date the claims are delivered to the insurer in line with Section 70 (1) (c) of the Act. If the insurance company needs to investigate the claim, it should do that within 90 days.
However, Article 1.2.2 (g) of Revised Market Conduct and Business Practice Guidelines For Insurance & Reinsurance Companies 2022 requires the insurance companies to deal with customers’ complaints in a fairly manner.
Also Article 4.0 to 4.6.11 of Revised Market Conduct and Business Practice Guidelines For Insurance & Reinsurance Companies 2022, stipulates claims handling procedures by insurance companies.
Despite the provisions of the Extant Laws, claims settlement has remained a mirage by some insurance companies. Experience had shown that some insurance companies were unable to settle claims due to Weak Capital Base, Insolvency, Poor Underwriting etc.
To re-awaken the Nigerian Insurance Industry through claims settlement, the following should be considered:
Increase Insurer’s Capital Base: The liquidity position of some of the
underwriters is very bad. The capital increase will assist the company to meet their obligations thereby re-awakening the Nigerian insurance industry.
Creating awareness on claims notification and documentation: Most of the policyholders lack awareness on claims notification and documentation. There is need for creating awareness on this because it will enable the claimants to provide adequate documents needed for their claims for prompt settlement. This will aid prompt claims settlement and in turn re-awaken the Nigerian Insurance Industry.
Beef up claims reserve: Claims reserve is money set aside for a claim that has been reported but not settled (RBNS) or incurred but not reported (IBNR). An insurance company assigns claims reserve to each file, reflecting its best estimate of the eventual settlement amount. Section (20) (a), (b) and (c) of Insurance Act. 2003 requires insurance companies to make provisions that will cater for unexpired claims and outstanding claims.
Compliance with Section 25 (1) and (2) (a-g) of the Insurance Act 2003 regarding Protection of Policy holders Funds: Section 25 (1) and (2) (a-g) of the Insurance Act 2003, protects policyholders fund by directing the insurers on how to invest policyholders funds. Insurance companies should strictly comply with this provision of the Act at all times to enable them mitigate the risk of not been able to perform claims obligations when loss occurs as a result of inadequate investment of policyholder’s funds.
For policyholders who feel they have met every demand for claims payment, but been delayed unnecessarily or denied, should note that Section 1(1) of NAICOM Act, 1997 mandates NAICOM to ensure the effective administration, supervision, regulation and control of Insurance business in Nigeria. Section 8 (a) of NAICOM Act, 1997 empowers the Commission to establish Complaints Bureau to which complaints against the insurance institution may be submitted by members of the public.
The Commission had made numerous laws and regulations concerning the protection of policyholders to ensure that genuine claims are settled timely. The Inspectorate Department of the Commission carry out several inspections on insurance institutions to enhance insurance companies solvency so that claims will be settled timely.
The Regulator should not relent in their functions. They should continue to make rules and regulations to enhance fair customer treatment as well as supervise the compliance of the regulations to ensure robust claims management system. This will assist to re-awake the insurance industry through claims settlement.
Insurers must help the insured by embarking on awareness campaigns- essential to inform Nigerians about their rights, the value of insurance, and the measures being undertaken to rectify past shortcomings. Such initiatives aim to not only educate the public but also hold insurance companies accountable for their promises.
Similarly, Insurance companies will deny claims if it determines that coverage has lapsed. Reasons why insurance coverage may lapse: failure to pay premiums on time, when insurer unilaterally canceled the policy, leaving the property exposed to additional loss and not taking reasonable steps to reduce the extent of the loss, or when the insurance company no longer exists, could be grounds for a denial. If your life insurance claim was wrongfully denied, you should speak with an attorney today or a insurance consultants.
Against the belief that insurance companies would not want to pay claims, an insurance titan, Mr. Gus Wiggle, debunked such perception saying, “From experience, policyholders who lay claims from the insurers, are most times to be blamed for delay or outright denial of compensation, what should policyholders do to avoid this delays or possible denial?
“I will continue to encourage that anyone who wants to buy insurance should go through an intermediary who is qualified to advice and sell insurance, having said that, when policyholders do the right things at the right time and manner,
I do not see how the claim should be delayed except you have not documented the claims properly or the insured event is outside the policy condition, however policyholders have right to ask questions, seek clarifications and insurers must ensure that the insured fully understand every terms and conditions to the letter,” he maintained.
