Most of the issues and unhappiness pertaining to business insurance claims are directly related to the failure to provide a full and complete disclosure. The business owner either neglects to disclose a specific detail at the time of concluding the agreement and purchasing the insurance policy – or neglects to disclose all the details required in the claim form.
It is important to understand that some information falls under the “domain” of the business owner and the insurer has to trust the business owner that all the correct detail has been provided. It is often the unenviable task of the Ombudsman in the case of a disputed claim to refer the client to his insurance policy and to the details that he disclosed at the time of purchasing the insurance.
We would like to assist our business owner by providing advice on what the requirement of full disclose is all about! We approached the experts at Business Outsurance to provide a few answers:
What are the most important disclosures required at the time of purchasing the policy?
We need crucial information relating to the businesses activities (e.g. production, retail sales, administration) because different business warrant different rating and underwriting considerations e.g. the fire risk for an admin office is significantly different to that of a manufacturing plant). The business incidents/claims profile and insurance history are also crucial.
What do you find are the things that clients most often neglects to disclose at time of policy purchase?
- Previous insurance history with reference to claims and uninsured losses
- Previous insurer cancellations or where special underwriting conditions were applied
- Drivers not licensed correctly – Correct license and permits that may apply or the license may have been endorsed
- Vehicle usage and drivers: who will drive the vehicles and for what purpose e.g. a pool car used for business purposes
What role does the assessor play in ensuring compliance with the disclosure requirements? When will an assessor go to the premises to evaluate that everything is as disclosed correctly?
- The risk consultant/assessor is appointed to assess the risk based on certain criteria (e.g. business type, insured values). This is an upfront assessment (i.e. it take place before the cover is incepted) so the disclosures can be confirmed during this process. There are instances where there is no such assessment in place, or where the risk criteria change during the course of the cover) where we rely on the credibility of the disclosed info.
- The risk consultant/assessor thus plays a vital role in the process, firstly by verifying the disclosures and then also by presenting risk management advice to the client. That latter has mutual benefit for us and the client since the improved risk reduces the likelihood of losses happening and can help to reduce premiums.
Can a business client ask for an assessor to come to his business and check if everything is correctly disclosed?
- When this is requested we will gladly assist the client with the request and check and answer all the questions/concerns raised
How would you advise that a client ensures that everything is compliant on his side? Should he take photos, keep written records of all disclosures etc?
- Firstly it’s important to alert the client to the negative consequences of incorrect disclosure.
- The risk assessment process is thorough in that photos are taken, risk reports and recommendations are drafted, and any necessary risk improvement measures are confirmed. The latter is done telephonically on recorded lines and in writing.
What do you find are usually the things not properly disclosed or fraudulently omitted at the time of submitting a claim?
- The answer is too broad to deal with adequately in this response and it’s crucial to distinguish between the innocent disclosure and the fraudulent one. People do forget things and we need to try and establish whether it was innocent or intentional. When there is an intentional element people are really creative because they omit info on purpose. An example is where a client misrepresents the details of the driver of a vehicle in order to get a reduced premium. Another example is where risk upgrades are not implemented until after an incident e.g. the installation of a security alarm.
How would you describe the “material facts” to be disclosed?
- In my mind ‘material’ relates to any factors which influence the acceptance of a risk (as is or subject to certain conditions), or the premium to be charged.
Does the policy “Questionnaire” cover ALL the facts to be disclosed or are there further requirements the client should be aware of?
Yes – The policy questionnaire should cover all the facts to be disclosed