Insurer and agent ignore duty of disclosure. The insurer and agent are not following the duty of disclosure. In the insurance industry, there is a rule that the applicant must sign on the dotted line before the agent can submit the proposal form to the company.
In the life insurance industry, to fulfil the quote or qualify for the company incentive overseas trip, the agent will be very darling to alternative or add any extra rider to earn more commission or quota.
A stranger’s call desperate need of help
A lady called me one day.
“Are you, Mr. Jamin?” she asked.
“Yes, Miss. How can I help you?” I responded.
“So, you are the modern Justice Bao in the insurance industry. Can you do me a favour?”
“Thanks for the compliment, but I’m not Justice Bao. I’ll do what I can. What’s the matter?”
“It concerns my life insurance, which I bought from an agent almost two years ago. Can we meet next week? Is that convenient for you?”
“Okay, that’s fine with me,” I said.
She showed me all the relevant documents. She wanted to cancel the life policy, which had half-yearly payments, and seek a full refund of the premium.
Life insurance is not my cup of tea
Initially, I was reluctant to help since life insurance was not my expertise. I specialize in general marine insurance. However, after seeing her persistent efforts to get the full premium refund, including help from several life insurance agents and multiple appeal letters to Bank Negara, I decided to assist her.
“What did your agent say to you?” I asked.
“The insurance company is willing to settle for an amount between RM22,000 and RM24,000,” she replied.
“Why is that? It seems like a bargaining game to me,” I said.
“The insurer needs to deduct all the agents and up line commission before refunding the balance to me,” she explained.
“Why do you want to cancel this policy?” I inquired.
“It wasn’t an honest deal. The agent assumed she didn’t want any hospital benefits included in the policy,” she answered.
Finding flaws in the proposal form
I carefully examined the proposal form and noticed an alteration.
I wrote a letter on her behalf to the Bank Negara Customer Services Bureau on September 23, 2005. In October 2005, the authority wrote a letter to the insurance company, giving them 14 days to reply to the complaint.
On December 8, 2005, she received two cheques: one for RM33,750 as a full premium refund and another for RM2,700 as an 8% interest charge.
Duty of Disclosure
Your duty of disclosure: Before entering a general insurance contract with an insurer, you have a duty under the Insurance Contracts Act 1996 to disclose to the insurer every matter you know, or could reasonably be expected to know, that is relevant to the insurer’s decision to accept the risk of insurance and on what terms. You have the same duty to disclose these matters before you renew, extend, vary, or reinstate a general insurance contract.
What is the outcome of not following the duty of disclosure?
If the duty of disclosure is not followed, several negative outcomes can occur:
1. Claim Denial: The insurer may deny claims if it is found that relevant information was not disclosed at the time of the policy agreement.
2. Policy Cancellation: The insurance policy might be cancelled or voided, leaving the policyholder without coverage.
3. Financial Loss: Without insurance coverage, the policyholder will bear the full financial burden of any loss or damage.
4. Legal Consequences: There can be legal repercussions for intentionally withholding or misrepresenting information.
Following the duty of disclosure ensures transparency and fairness, protecting the policyholder and the insurer.
Why are the agent and insured not following this duty of disclosure?
There can be several reasons why both agents and insured individuals may not follow the duty of disclosure principle:
1. Lack of Awareness: Both parties might not fully understand the importance of disclosure or be unaware of the requirements.
2. Miscommunication: Sometimes, information may be lost in communication, leading to incomplete disclosure.
3. Negligence: There might be a lack of attention to detail or carelessness in providing all necessary information.
4. Intentional Omission: In some cases, there could be deliberate withholding of information to avoid higher premiums or to increase the chances of getting a policy approved.
5. Pressure: Agents might face pressure to meet sales targets and, consequently, might overlook or downplay certain disclosure requirements.
6. Complexity: The process of disclosing every relevant detail can be complex and time-consuming, leading to incomplete information being provided.
Understanding and following the duty of disclosure is crucial for ensuring fair and effective insurance contracts. Ensuring thorough and honest communication between both parties can prevent many issues and lead to better protection for the insured.
If you like my article
Please share it with your friend or family member. Sharing is joy doubles. I welcome any suggestions and comments or be a subscriber to my mailing list.
Please email me at [email protected].
Thanks
Interesting read. I have a background in life insurance in my own country. I am sorry to hear that this happened and it is unfortunate that things like this do happen. I hope you had also done your fudiciary duty to report this to your insurance licensing committee about this particular agent. Although this is duty is typically universal throughout the insurance industry, you may want to specify country of origin. I can say that if I had come across a policy set up this way, I would have been reporting this to my insurance council right away.
Thanks for reading this article and giving the valuable comment. In fact, the insured get the full premium refund plus the delay in interest as a compound. what happen to the agent is of no interest to me.
Thanks for the information. I had no idea you had to worry about what a agent might do out of greed. Thanks.
thanks for reading my article and giving me the valuable comment.
You need to check the detail policy one it was delivery to you. If you find the policy not up to your satisfaction, like any alternation additional rider.Inform the agent and the insurer in black and white or cancel the policy and return the policy to the insurance company personally within 14 days.
So, what happened if the insured person did not disclose every thing? Every risks? I think it seems like a common thing for people to not tell every single details.
Thanks
Thanks for reading my article and giving the valuable comment.
Yes, you need to declare like for instance you are a hypertensive in the proposal form. Otherwise, you are in hot soup during any claim especially the medical insurance.
Still being wet behind the ears so to say this is very useful, most people my age,23, and sometimes older don’t understand to double check before signing anything and check again because everyone is naive to some extent, especially with insurance because everyone needs that.
Thanks for reading my article and giving me the valuable comment.
One needs to extra careful dealing with insurance. Make sure u photostat a copy of the proposal and comparing with the actual policy jacket when delivery.
Hi Jamin, i enjoyed reading this story and sad at the same time to what happened to her, i think it is a must to read any paper given to us before signing but still there might be some things that only someone with some expertise can explain to us,looking forward to see more advices like this from you.
Thanks for reading my article and giving valuable comment. It is wise to scan through the policy jacket thoroughly before singing back the acknowledge copy to the insurer. If any doubt please contact the agent or the insurer for any clarification.