APPRAISAL OF THE INSURANCE COMPANIES APPROACH TO CLAIM SETTLEMENT
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF STUDY
The saying “HAD I KNOWN”, is a frequent question of the human race. The phrase can be induced or possibly eliminated if human beings can foresee or visualize what would happen in future. Life itself is full of risks and uncertainties abound. Every individual faces risks, either of personal nature or business nature. A businessman for instance faces the risk of his goods being damaged by fire while his dependant may suffer loss of income through his death. Equally, a manufacturing firm runs the physical risk of possible loss of goods by fire or theft or such other technical risk as loss of trade as a result of government policies, loss of trade of trade due to change in fashion, loss of profit as a result of fire outbreak. A car owner for instance stands to face the possible theft of his car and damage through accident. Efforts can be made to avoid some of these risks. Accidents can be avoided if proper precautions are taken. An individual can avoid airplane disaster or crash by not engaging in air travel no matter how careful one can be, some form of danger still hangs around.
Some risks are inherent in nature or life itself and cannot be avoided. For instance, men are mortal and must die, when complete avoidance is impossible, man attempts to reduce or possibly assumes risks. A thatched roof house is a greater fire risk than one with tiled roof. Many people accept the small risk of building house of standard construction than that of thatched roof. Here the risk has not been avoided but reduced. Risk assumption may also arise out of ignorance or may even be an intentional art where the degree of expose risk is slight or possible loss is minimal. Assumption is even possible where a deliberate provision has been made for consequences of loss happening. Many individuals would however prefer to shift or spread the risk where possible. It is here that Social Economic Services rendered by Insurance companies will be appreciated. Insurance has been described as a social device by which the Insured agrees to transfer all or part of his risks to the Insurer who agrees to indemnify him when the risk insured against happens on the payment of the premium. The basic role of insurance is to create a common pool into which the individual or organization contribute premium commensurate with the degree of risk for which insurance is sought. The members of the pool who are unfortunate to suffer loss are compensated with the contributions of others in the pool. In this way, the larger society is made to be made to be responsible for providing compensation for the unfortunate few who unavoidably incur financial losses through the operation of certain mishap.
It is therefore obligatory on the part of the insurer to compensate the insured (their client) whenever, is loss on the item insured against as long as the insured abides to the conditions stated in the contract or policy. Thus, the modern society retain insurance as the method of solving the risk associated with their activities, in that it helps to soften the financial blow that would have resulted. When the public feels that this function is not being carried out the industry may suffer or face a possible collapse.
STATEMENT OF PROBLEM
The major reason for the establishment of insurance company is to provide a cushion for individual or organization that has or may suffer some misfortune at a price called premium. Sometimes when loss occurs and claims presented, they are delayed or declined and when paid it does not restore the insured to his former financial position. This has formed the architect of dispute between the insured and the insurer. These I think affect the attitude of insuring public and development of the insurance industry in Nigeria. It is therefore the purpose of the study to find out why claims are delayed or not paid at all and the role played by the insuring public that result in claim being settled or declined. The study also finds out if approach to claim settlement affect attitude of the insuring public and to what extent it affect the development of the insurance industry.
OBJECTIVES OF THE STUDY
The objective of this research work is to look into the performance of the Nigerian insurance industry viz a viz the procedure and approach to claim settlement. Individuals hold diverse opinion about this industry and the general impression is that the insurance industry has failed to win the confidence of the insuring public. Often times, people make remark such as “unwilling to settle claim but always willing to collect premium and use its small prints in the policy to decline its liability”. It is the belief about the industry is allowed to continue and not corrected that the industry will totally collapse and the after effect will be over bearing on the economy. When we consider the importance of insurance in the economic development of any nation, it is therefore the intention of the researcher to find out if this allegation is true or otherwise, proffer solution and make recommendation that will help to solve these problems.
The purpose of study among other things is to:-
- Find out if insurance companies are capitalizing on the ignorance or illiteracy of the insuring public.
- To find out what the perception of the public is towards insurance companies.
- To find out if there are laws that make it impossible for them to settle claim that are genuine.
- To find out what makes it difficult for insurance companies to settle claim when they arise.
- To find out the effect of rate cutting on the insurance companies.
RESEARCH QUESTIONS
Having defined the background to the problem and purpose of study, it is therefore expected that practical answers will be provided to the following questions at the end of the study.
- Does illiteracy of the public have nay effect on the ability of the insurer to settle claim?
- Does the insuring public involve intermediates in their insurance affair or contract?
- Should emphasis be laid on police report before claim settlement?
- Why is the issue of under settlement common?
- Is there a shift from comprehensive to third party motor?
- How effective is their approach in claim settlement?
SIGNIFICANCE OF STUDY
Claim administration is the core of insurance business; an efficient and prompt setting service is the best of advertising for an insurance company. But since claim settlement has been a subject of controversy this study will help:-
-The insurer claim. Setting superior value and effective settlement of claim. The insurance company can change their customer expectations and make them the engine fuel of innovation by listening to their careful analysis, complaints compliment and evaluation of their services delivered.
-The study will also be relevant to academicians who may wish to know themselves of data and information about claim settlement situation in enugu, it will also enlighten the public at large on insurance matters. More so the study will serve as a dimension to putup researchers and will give them the bases for validating and disapproving the finding of this study.
SCOPE AND LIMITATION OF STUDY
The scope of this study covers Nigeria but because of time and difficulty in reaching all the insurance companies in Nigeria, the researcher close to cover only the registered insurance companies in Enugu state.
LIMITATION:- in carry out a research work researcher is bound to encounter some difficulties which act as limiting factor. The following are the limitation in this study. The cost of carrying out a research work is getting very high especially during this period of harsh economic reality which places a greater burden on the researcher’s limited resources. In order to carry out an in-depth study on any subject matter time is absolutely required.
The researcher was constrained in carry out in-depth study on major matter due to complete factors affecting the disposal of time. The level of some of the respondents caused some communication problem for researcher and this her to rely on the service of interpreter during interviews.
Getting response from commercial vehicle owners was an uphill task. These were inadequate materials hence, the researcher was faced with difficulties, in sourcing relevant material for this study. The researcher has rely on mostly on material from oriental insurance co. The nature of this topic was very general and wide. The researcher has to narrow it down to vehicle insurance claim since it is the most common, compulsory and formed the basis on which conclusion about insurance is drawn.
DEFINITION OF TERMS
POLICY:-this is a document which gives the term and condition of insurance contract. It is popularly called insurance policy and it is given to the insured by the insurer after his proposal has been accepted and his premium paid. This shows an evidence existing contract between the insured and the insurer.
PREMIUM: - is the monetary consideration passing from the insured to the insurer for their undertaking to pay the sum insured in the event of the risk insured against happening. It is a necessary element in formation of an insurance contract.
PROPOSAL FORM: - This is a document drafted by the insurer and which seeks answers to main material aspects of the risk. It is a questioned designed to elicit material information pertaining to the risk to be insured. It is completed by the person who wants to enter into insurance contract.
CLAIM FORM: - This is a form in which the insured states the circumstances of the occurrence of the damage or loss for which he sought the form given to him by the insurer.
CLAIM: - This is an application by the policy holder to exercise the right to indemnify or benefit under the policy.
LOSS ADJUSTERS: - This is an independent firm whose services are employed by the insurance company if there is excess claim by the insured to assess such claim. After their assessment, their judgement is final and they are paid for such services by the insurance company.
NOTICE OF RENEWAL: - A policy meant for one year for instance, 2000-1st January 2001 is expected to lapse at the end of one year. So before it lapses, a renewal is sent to the insured reminding him to come and renew his policy because any claim on lapsed policy is not entertained.
ALMOST GOODFAITH: - Due to its fiduciary nature it is required by this doctrine that all parties to an insurance contract should disclose material fact concerning the contract that they want to enter into whether required or not.
PROXIMATE CAUSE: - The active efficient cause that sets in motion a chain of events which brings about a result without intervention of any force stated and working actively. From new and independent source in Pawsay V. Scottish union and national (1907).
CONTRIBUTION:- is the right of an insurer to call upon others similar but not necessarily equally liable to the same insured to share the cost of an indemnity payment (J.I.Stell, Elements of insurance study course II textbook, London, chapter 5 page 5)
SUBROGATION: - Is a contract that beholds indemnity contract. It is to prevent the insured from receiving more than indemnity.
INSURABLE INTEREST: - Legal to insure arising out of financial relationship between the insured and subject matter of insurance enforceable at law.
INDEMNITY: - Is the control principle of justice. Brett n Castellen V. Preston (1883). Indemnity is a mechanism of pulling the insured back to the former position he enjoyed immediately before the loss.
RISK: - Is the chance of loss. Risk is also the uncertainty as to the occurrence of an economic loss.
