The irony of settlement of insurance claims, is that the recipients of insurance claims cheques walk away quietly unannounced. This is due to respect for the customer’s privacy, unless the customer is magnanimous to allow some publicity, may be in a celebrated case. In 2021 alone, NAICOM disclosed that the insurance industry paid N238 Billion out as claims. Thus billions are paid out annually in settlement of claims in Nigeria. Yet, what you often hear and ‘loaded’ are individual stories of unsettled claims. Why may an insurance company decline to settle insurance claims at certain times? Does insurance really work in Nigeria? Apart from people who already know you and your personality, many others have a problem of trust with insurance professionals. So, insurance professionals are constantly vilified by individuals and the press.
However, it is also true that every profession owes the duty of high degree of duty of care and responsibility to whatever it holds out itself to the public as a professional. Insurance has come a long way over the years. We now have full-fledged professionals with strong fiduciary responsibilities to our clients and guided by strong regulations. Insurance is a global concept of invisible security at the heart of all critical business activities. International businesses like air travel, freighting, international trades, shipping across the globe, bank loans and the like would be near impossible without guarantees and assurances of insurance. So, it would be wrong to look at insurance with the eye of the local salesman or agent trying to win you for a cover. Insurance is respected globally.
Like all contracts, there is a continuing contractual obligation for all parties to a contract – conditions and warranties. Transparency of mutual contractual obligations has continued to be an essential part of all pecuniary contracts over the years in normal commercial contracts, as well as insurance contracts. A warranty breach, in insurance, goes to the root of the contract. The presenter of a risk for insurance knows everything about the risk more than the insurance company – the client is thus expected to establish clearly his relationship with the subject matter of insurance. The Insurance company is also expected not to have hidden clauses in tiny letters to avoid claims payment.
Insurance is built on six core principles. One of them in called the Insurable Interest. This principle seeks to establish that your relationship with the subject matter of insurance is not frivolous but firm and possibly legally recognized, so much so that you would be prejudiced by its demise or the destruction of the subject matter of Insurance, or continue to benefit from the existence of the subject matter of insurance.
This developed out of the need to distinguish insurance from gambling and speculation. This is to also avoid fraudulent situations or schemes arising. Thus, apart from the direct family of the president, no one had the recognizable right to take life insurance on the life of the president. This is even though no one wants a dead president.
There are however situations like what is called keyman insurance – this is possible only as far it relates to the importance and financial and implication of the keyman’s absence and project relevance. Thus also, no one can take a life insurance on the life of a girlfriend or boyfriend. These are not recognized relationships at law. No one can take insurance on the property of another person without firmly establishing proof of ownership and legal relationship.
So, when an insurance contract is found to have been entered in error because of breach of this principle, it could invalidate the contract from the point of law ab initio and thus affect a claim.
However, some contractual relationships may establish liabilities that may enable people or organizations with indirect relationships take on certain insurances. Thus, a loan from a bank may establish the need for a fire insurance on a building serving as collateral with a ‘lien clause’ in favour of the bank. An insurable interest is thus established. In simple terms, this is one way this principle of Insurable Interest protects the sanctity of practice of insurance against gambling and speculation, other vices or fraudulent intentions.
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