The handling of any claim is governed by policy conditions and terms. Compliance with conditions applicable to the policy is very important as it determines the acceptance of liability. Some of these conditions affect the amount payable. The claims conditions exist in two forms;
- Express conditions
- Implied conditions
Expressed claim conditions
These are conditions introduced by the insurer and appear in the policy document.
They comprise of;
Obligations of the insured
- The insured is required to act always as if uninsured and take possible measures to minimize the loss.
- He should report any incident giving rise to a claim to the insurer within specified time
- He should not admit liability in case of a claim
The insurers obligations following a claim
The insured is required to:
- Deal with a claim by taking reasonable measures to deal with the insured property in a bid to minimize further losses
- Handle claims prompt and fairly
- Provide reasonable professional guidance to the policyholder when a claim occurs
- Not to unreasonably a claim
- Settle claims promptly once settlement has been agreed
Fraud
Should the insurer establish fraud on the part of of the insured, the contract will be cancelled and all benefits forfeited. Insurance fraud can take a variety of forms such as,
- Inflating a genuine claim,
- Causing deliberate, as opposed to accidental damage, to the insured property.
- Creating a fictitious event like theft of spare parts that never took place.
Fighting fraud has become one of the key objectives of insurers because in Kenya estimates show that 30 to 40 percent of claims paid are fraudulent.
Reinstatement
Besides paying by cash, the insurer has the option to pay claims using any other method appropriate in the circumstances, for example, in fire insurance, the insurer may opt the damaged building.
Average
Average applies where the sum insured is lower than the market price of the subject matter of insurance at the time of loss.
Subrogation
Subrogation allows the insurer to acquire rights and remedies of the insured against another party who is responsible for the loss. The insurer can acquire the rights before and after the payment of a claim
Contribution
Where there are two or more policies covering the same subject matter of insurance, the condition states that the insurer will only be liable to its ratable proportion of the loss.
Arbitration
Where the is a dispute on the amount to be paid, it will be referred to an arbitrator appointed by the insured and insurer.
Implied conditions
These are conditions which are imposed by on contracting parties on the law but are not expressed on the policy. The most common implied conditions are:
- Insurable interest- the insured has insurable interest in the subject matter of insurance. Insurable interest can arise out of ownership.
- Utmost good faith – the insured must disclose all material facts affecting the claim event and the subject matter of insurance.
- Existence of the subject matter of insurance – the subject matter of insurance must be in existence at inception of cover and also at the time of loss.
