Author: Eren Anil
Source: articlerich.com

The principle of insurance is very simple to understand. It is best defined as indemnity, ‘a sum paid by A – B buy way of compensation for a particular loss suffered by B. Taking a closer look it the concept, insurance can also be defined as ‘compensation to the beneficiaries of the policy for their actual economic losses, up to the limiting amount of the insurance policy’ with this definition being more familiar to you and I.

In the modern world you can insure against anything, your car, house, pets, jewellery, personal possessions, holidays, health, even your limbs. The problem is that you are in essence insuring against a possible event or scenario that may not happen once in your life. For years you could be paying for something that has no benefit to you whatsoever other than to make your disposable income less than what it was previously. Once the money is paid it is solely down to chance if you will need to call upon your cover to rescue you, it becomes a gamble, an educated risk, entrusting whatever you want not to lose to the ‘insurance gods of fate’.

So far we have established that the concept of insurance is a bit of a risk, but the process of trying to acquire as the definition implies ‘economic losses, up to the limiting amount of the insurance policy’ is even more worrying. First of all it is the time it takes, insurance claims can drag on for months and months without a settlement being agreed let alone reimbursed, insurance claims can drag on so long that it is a wonder that their is no insurance against loss of earnings whilst trying to make a claim on an insurance policy, or an insurance policy that covers the cost of calling your company in a land far far away.

Even if you get passed this stage you have more financial mountains to climb in the form of excess. Excess means that in addition to the monies already paid you are obliged to pay more money to actually action what you were paying for previously in the first place. This is like buying a pen for a pound then having to pay 20 pence every time you want to write something. Is this a fair price to pay for alleged piece of mind?

It gets worse too, even if you don’t claim, and you are a loyal customer for years and years, there is no guarantee that the cost of your policy will be reduced. For instance if you live in Kent and there happens to be some bad weather in Bolton where a high number of claims have been made for flooding, your house insurance policy could increase even when your 270 miles away, so you are being penalised for not your own misfortune but someone else’s harsh luck.

All of this sounds quite bad, but before you start ripping up your insurance documents, we are not completely innocent in this relationship. Fraudulent claims on all aspects of insurance have been common for a long time now. It seems that if you are a shop-keeper and your shop needs renovation it is much easier to take a match to it and claim for accidental fire. This way you kill two birds with one stone in getting a shiny new shop, and claiming some of the money that has been paid over the years back.

Also more of a recent trend has been the injury claim; in 2006 over £30 million was spent on ‘slip & trip’ claims rising from £20 million three years earlier. Are we suggesting that people are becoming more accident prone, or that establishments are becoming more hazardous – this is not realistic. However members of the public and injury claim company’s taking advantage of the cover available is more believable. It is feared by local authorities that over 70% of the claims of this nature are fraudulent or exaggerated and in some extreme cases did not even happen at all.

It goes further as well, with people exploring all the possible ‘loop holes’ in their insurance policy to gain some kind of financial advantage.

A lawyer in Charlotte, NC purchased a box of very rare and expensive cigars, and then insured them against fire among other things. Within a month, having smoked his entire stockpile of these great cigars and without yet having made even his first premium payment on the policy, the lawyer filed a claim with the insurance company.

In his claim, the lawyer stated the cigars were lost “in a series of small fires.” The insurance company refused to pay, citing the obvious reason: that the man had consumed the cigars in the normal fashion. The lawyer sued….and won! In delivering the ruling the judge agreed with the insurance company that the claim was frivolous. The judge stated nevertheless, that the lawyer held a policy from the company in which it had warranted that the cigars were insurable and also guaranteed that it would insure them against fire, without defining what is considered to be “unacceptable fire,” and was obligated to pay the claim.
Rather than endure lengthy and costly appeal process, the insurance company accepted the ruling and paid $15,000.00 to the lawyer for his loss of the rare cigars lost in the fires.

So who is to blame, is it the system? Or is it the consumer’s dishonesty that is creating this battle? To try and answer the original question of who is scamming who, it would be fair to say both are guilty. However if the consumer are winning the battle, I would still say that Insurance is winning the war.

The author is a contributing writer for jltbis.co.uk. JLT Business Insurance Services are a leading provider of Business Insurance and Public Liability Insurance online.