Have you ever heard that an agent helps the insured with the fraud claim? You might ponder is it possible? But it is true, I did stumble across such an unscrupulous agent in my 27 years in the insurance industry. A lot of ignorance insurance agents with poor knowledge selling an insurance policy. Whom to blame? The agent or the insurer?
Insurance fraud claim with the aid of an agent
While during any seminar, I mingled with a lot of insurance agents. An insurance agent in the insurance industry for a few decades, but the level of knowledge in insurance is instead skin deep. They live in their comfort zone, never want to upgrade themselves by selling the easy product i.e motor insurance. Another. class of insurance knowledge is minimal
In the insurance agent training session, I remember vividly a senior with three decades of experience in the insurance industry.
Insurance Fraud Claim Intention
“Can we have two 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 is reinstatement with the principle of contribution in the event of a claim. Life insurance all policy will pay for the assertion, but reimburse for medical expenses.”
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.
An agent can act in life and general insurance. One day, he Approved me for the claim, as he was confused with the final claim settlement.
Fire Fraud Claim Damage by Insured
A fire broke out in the furniture factory, engulfed the storeroom and destroyed all the content. Nevertheless, the owner insured the store-room for a million covering finished product.
” Why the owner gets only half of million dollars to claim instead of one million.”
He further explained that the owner insured the store with two 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 fees without any chance of winning the case.” I enlightened him.
“Why not? it is the insured’s right.” He argued with me.
“The insured has so much money to spend on legal and court fees. Why not use the fund to spend to rebuild the storeroom? In your client case, the contribution principle applies.”
Contribution to avoid insured fraud claim
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. For example, 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.
How does contribution work?
Thus A and B can contribute by equal shares i.e., 250,000 each, therefore add up to 500,000. Hence, 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 insurer’s limit of liability.
Either A or B pays out 500,000 individually; which 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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