Thursday, December 23, 2010

Fallacy of Insurance

An insurance related article written by YS Chan, Sunday Star. Texts are reproduced here for your reading pleasure.

INSURANCE has been misunderstood for a long time and even today, many people still have the wrong notion. A lot of pain and frustration can be avoided if more people have a clearer understanding of it.

To begin with, insurance does not offer any protection although the word is popularly used to sell insurance. It can only pay compensation to the unfortunate insured party. It works by getting a larger number of people to participate in a huge fund managed by an insurance company (the contribution of the many to pay for the losses of a few).

For most of the contributors, there is no monetary return as they fortunate not to suffer any harm to themselves or their properties.

For the minority, who are not so lucky, the compensation paid out to them is much more than the premiums they paid. It is an "odd" case of the winners losing their money and the losers gaining it.

However compensation can never replace what was lost and very often the claimants would receive less than they hoped for.

The Insured must always bear in mind that it is not practical for Insurers to provide full and total coverage to keep the premiums at an affordable level.

Life insurance policies with just the basic cover popularly known as term assurance have proven to be unpopular other than for mortgage cover. As such, the majority of life insurance policies are those with loaded premium, which allows insurance companies to invest and eventually return to the Insured, more than what they have paid.

It is important to note that insurance companies must remain profitable otherwise their operation is not sustainable. The public should not be lured by low premiums or high returns as everything would be lost should an insurance company collapse.

From time to time, we come across complaints by senior citizens that they are not eligible to buy insurance and have their life savings wiped out by expensive medical care.

We must realise that life and medical insurance can only be bought with our health and paid by our wealth.

For those who continue to scorn at the quality of our public hospitals or find queuing unbearable, get your insurance cover now before it gets too expensive or beyond reach.

However, having an insurance company to underwrite your risks does not necessarily mean there are no further monetary risks to worry about.

It would be wise to read and adhere to the fine prints as the Insured may not be fully covered for all types of contingencies.

The best form of protection is to be careful, lead a healthy lifestyle and contribute to make this world a safer place.

Wednesday, December 22, 2010

Tips No. 3 on General Insurance Claims Handling

Tips No.3: Loss Notification

It is a condition precedent to liability that any claim for loss or damage should be notified by the Insured to the Insurer, in writing, immediately.

However, there are many cases of such claims being rejected outright by the Insurer as the loss or damage does not come within the scope of the cover or there are breaches of Policy Conditions. The Insurer will want to double check the followings are in order before registering the claim.

THAT:
1)  the loss or damage is an insured peril under the policy
2) the subject matter damaged is the one specified under the Policy
3) the claimant is the one insured and named in the policy
4) the policy is still in force
5) the loss or damaged happened within the territorial limit
6) the Premium has been paid
7) All other Policy Conditions are fully complied with

Upon satisfying themselves with these conditions, the Insurer will sent out the claim form to the Insured for completion. Insured is required to return the Claim form to the Insurer  together with all claims supporting documents, within 30 days from the loss notification date.

Whether or not a Loss Adjuster is appointed to investigte the loss or damage depends on the quantum of loss, fraud or complexicity of the claim etc. If the Loss Adjuster is involved, the Insured is required under the policy condition aka Rights of Insurers to fully co-operate with the Loss Adjuster to expedite the claim.

However, in many known situations, the Insured could not produce the supporting documents or proof of purchases to justify the loss or damage within the 30 days period. In the event a delay is anticipated,  the Insured can write to the Insurer officially, with valid reasons, to seek an extension of time to procure the required documents.

Notwithstanding the condition, it is the normal market practice for the Insurer to write to and to remind the Insured of the outstanding documents in the 12 months that followed. But if the Insured still failed to respond to the Insurer inspite of repeated reminders to do so, then the Insurer can exercise their rights under the "Time Limitation Condition" to close the file without further notice to the Insured. This time limitation condition is not applicable to claims involving litigation procedures.

TIPS NO 4 WHY THE NEED FOR CLAIMS SUPPORTING DOCUMENTS

Sunday, December 19, 2010

Tips No. 2 on General Insurance Claims Handling

REFERRING YOUR CASE TO FINANCIAL MEDIATION BUREAU (FMB)


INTRODUCTION

The FMB is an independent body that prvides you with a fast, convenient and efficient avenue to refer your compalints, disputes or claims for resolution as an alternative to the courts and the services of the FMB is offered free of charge.

WHEN TO REFER YOUR CASE TO THE FMB

Before the FMB can take your case, you should first lodge a complaint with your Insurer and try to resolve your complaint, dispute or claim with them.

If your compliant, dispute or claim cannot be resolved or you are not satisfaied with the final response given to you by your Insurer, you can refer your case to FMB.

You need to submit your case to FMB within 6 months of receiving a final decision from your Insurer.

HOW TO REFER YOUR CASE TO THE FMB

You can go personally to the FMB or write to the FMB by stating briefly the nature of your complaint, dispute or claim together with a copy of the relevant correspondence from your Insurer, including a copy of the letter conveying the final decision.

You also need to complete a standard form prepared by the FMB that will authorise your Insurer to disclose any confidential financial information related to the case to FMB.

SCOPE OF SERVICES

All complaints, disputes and claims other than those listed in the exclusions of the policy. This will include:
  • All Life Insurance/ Family Takaful Claims
  • All General Insurance/ General Takaful Claims
  • Other Banking and Financial Related
For complaints, disputes or claims involving a financial loss, the amount claimed should not exceed the followings:
  •  Motor and Fire Insurance/takaful up to RM200,000.00
  • Third Party Property Damage Claims up to RM5,000.00
  • Others up to RM100,000.00
The FMB will investigate the complaint, dispute or claim based on the facts presented objectively. The FMB may conduct an interview with you or together with your Insurer, through a mediation process to resolve the case. the FMB will then make a decision based on its own assessment taking into account the law and industry practices. The decision of the FMB is binding on the Insurer but not on you.

You can choose to accept or reject the decision of the FMB. If you do not accept, the decision is deemed cancelled and you are free to take any other steps in respect of the compliant, dispute or claim, including legal proceeding. However if you do accept the FMB's decision, you mat lose your right to proceed with the legal action against the Insurer concerned.

The mediation process are deemed to be a "without prejudice proceeding". The decision of the FMB or any part thereof relating to the findings or facts and expressions of views or opinion shall not be discussed in any subsequent court proceedings or arbitration

FURTHER INFORMATION

If you need more information, please contact the FMB at the followings address:

The Financial Mediation Bureau
Level 25,
No.4, Jalan Sultan Sulaiman,
5000, Kuala Lumpur

Telephone: 03-2272 2811
Fax: 03-2274 5752
Website: http://www.fmb.org.my/

Wednesday, December 15, 2010

Tips No 1: General Insurance Claims Handling

Problems making an insurance claim due to the lack of understanding of the subject.

Find out some useful tips on how to handle a claim effectively from a layman's point of view.

TIP No.1

ONUS OF PROOF OF LOSS

On the part of the Insured:
In order to claim, Insured must proved that the loss or damage was caused by an insured peril stated in the Operative Clause of the Policy

On the part of the Insurer:
To reject the claim, the Insurer need to prove any one or combination of the followings:

Loss or damage was caused by an excluded peril
Loss or damage was caused by an uninsured peril
Breached of one of the many Policy Conditions
Breached of Warranty attaching to the Policy
Non disclosure or concealment of Material Facts

Insurer will state the reason for the rejection in a formal reply to the Insured. As required by BNM, Insurer is compelled to disclose, in the letter, the name, address, email and telephone of the Financial Mediation Bureau (FMB) or BNM Complain Bureau for the Insured to lodge his/her complaint if he/she is not satisfied with the decision of the Insurer to reject the said claim.

Before the Insured seeks redress from FMB/BNM, it is advisable that he/she should file an appeal with the Insurer. If the Insurer still maintained their stand and turned down the appeal, the Insured can then direct the case to FMB for a decision to be made. Any appeal should be initiated, within 3 months from the date of rejection as allowed under the terms and conditions of the Policy. If the decision of the FMB does not favor the Insured, he/she can take the case to court. Insurer will defend their "no liability" stand with all the evidence they possessed. The Final verdict lies in the Court of Law.

There was a case involving a fire claim submitted by Asean Paper Mill in Butterworth many years ago, where Insurer initially rejected the claim on the ground of arson. Insured appealed against the decision but was shot down by the Insurer. No other alternative, the Insured took the case to court and after slightly more than 10 years of court battles, the Insurer was found to be liable and had to pay the claim in the region of RM20 million with cost and interests.

FMB was not involved in this case as they can only mediate for claims not exceeding RM200,000 (for motor and fire losses)

Tips No 2: Referring your case to FMB

Wednesday, December 1, 2010

Fire Insurance Design for SME

Just concluded a training session on Fire Insurance Design, Program Writing and Presentation skills.

Topics presented and discussed include :

1) An overview of the SMEs in Malaysia and the potential businesses that one can target for growth in terms of insurance premium

2) Analysis of the Risk using the various risk identification tools and loss control measures that can be undertaken by customers to minimize a loss from happening

3) Insurance Needs Analsyis and the appropriate protection and extensions required by the customers

4) Sourcing for competitive rate from the Insurer without compromising on the benefits

5) Writing out a comprehensive insurance program that entails the details of insured and the contract

6) Formal Presentation of the Insurance Program to Customers and Closing Techniques

This module can be customised to the Insurers and the Agents training needs. Please post your enquiries and I will response immediately.