An ignorance insurance agent helps insured for the fraud claim


An ignorance insurance agent helps insured for the fraud claim. Is it possible? A lot of ignorance insurance agents with poor knowledge selling an insurance policy. Whom to blame? The agent or the insurer?

Quality of Insurance Agent

While during any seminar, I mingled with a lot of insurance agents. Some of the insurance agents in the insurance industry for a few decades, but the level of knowledge in insurance is rather skin deep. They live in their comfort zone, never want to upgrade themselves by selling the easy product i.e motor insurance. Others class of insurance knowledge is very limited.

In the insurance agent training session. I remembered vividly a senior with 3 decades of experience in the insurance industry.

An ignorance insurance agent helps insured for the fraud claim

2 or more policies

“Can we have 2 or more fire policies for the same insured like the case of life insurance?” he asked me in the class.

“Fire insurance unlike life insurance, it is reinstatement with the principle of contribution in the event of a claim. Life insurance all policy will pay for the claim, but medical expenses are reimbursed.”

I further explained to the class how does the contribution works in the event of a claim.

In Malaysia, an insurance agent representing one life principal and two general insurance principals respectively.

The same agent can act in life and general insurance. One day, he approved me for the claim. He confused with the final claim settlement.

Fire Damage

A fire broke out in the furniture factory. The fire engulfed the store-room and destroyed all the content. The owner insured the store-room for a million covering finished product.

” Why the owner gets only half of million dollars claim instead of one million.”

He further explained that the owner insured the store with 2 insurers for half million dollars each. By right, the insured should get a million dollars. The insured intend to seek legal action against both the insurers for the claim settlement.

“Don’t be so naive, the insured will lose more on legal and court fee without any chance of winning the case.” I enlightened him.

“Why not, it is the insured’s right.” He argued with me.

“Absolutely, the insured has so much money to spend on legal and court fee. Why not use the fund to spend to rebuild the store-room? In your client case, the contribution principle applies.”

What is Contribution?

The contribution principle in insurance is a rule that specifies what happens when a person buys insurance from multiple companies to cover the same event, and that event occurs. The principle says that if the policyholder files a claim with one company, that company is entitled to collect a proportional amount of money from the other involved insurance companies.

 The factory store insured for half a million dollars from both insurer namely A and B. The actual total loss amounting to 500,000.
How does contribution work?

Thus A and B can contribute by equal shares i.e 250,000 each, thus add up to 500,000.  It is called contribution by equal shares.

The loss is shared equally among all the insurers that have valid insurance on the risk, up to the limit of liability of the insurer.

Either the  A or B pays out 500,000 individually. This is known as the contribution by limits.

All insurer’s share of the total loss is the percentage of that loss that the insurer’s policy limit represents as part of all insurers’ applicable limits.

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