In­surance com­pa­nies’ duty can make them seem heart­less

Auckland City Harbour News - - NEWS -

In­sur­ers pos­sess a unique abil­ity to make them­selves ap­pear heart­less.

But ap­pear­ances some­times be de­cep­tive.

In the last week, we have been treated to in­surance com­pa­nies seek­ing money from: a) the par­ents of a boy who had col­lided on his scooter with the side of a mov­ing car, dam­ag­ing it, and b) an el­derly woman pur­sued for dam­age she caused while bounc­ing over the bon­net and roof of a car she had stepped in front of.

The sums sought are small, in both cases less than $2000. So why did the in­sur­ers risk such an enor­mous public re­la­tions black eye by pur­su­ing tiny debts from com­mon ac­ci­dents?

The an­swer is to be found in a lit­tle-read clause in your con­tents in­surance, and what is dubbed the ‘‘knock-

can for-knock’’ prac­tice.

Your con­tents in­surance con­tains a clause in­sur­ing you for prop­erty dam­age caused by you or other mem­bers of your house­hold.

On its grand­est scale it is there to pro­tect you from catas­tro­phe, such as for ex­am­ple, hav­ing a bar­be­cue and ac­ci­den­tally set­ting fire to the field be­hind your house, which in turn sets fire to a for­est, which in turn burns down sev­eral mil­lion dol­lars worth of timber.

But of course, it also cov­ers mi­nor dam­age you might cause, such as your son skate­board­ing into a nun’s car door as she backed out of her drive (yes, that ac­tu­ally hap­pened), or step­ping in front of a Fer­rari while tex­ting and spoil­ing its lovely, fiery-red paint­work (so did that one).

The knock-for-knock refers to the sys­tem of in­sur­ers pay­ing each other un­der that clause in the con­tents cover when there is fault.

Why bother, you might ask, for small sums? Won’t it all even up over time?

Pos­si­bly not if one of your pol­icy hold­ers burns down that for­est. Also, imag­ine that was your Fer­rari.

I bet you’d have a heck of a pre­mium to pay, would have a de­cent ex­cess on dam­age to body­work given the car’s low-slung na­ture and the state of the roads and kerbs, and I bet you would covet your no-claims bonus pretty fiercely.

In seek­ing pay­ment from an­other in­surance com­pany your in­surer would be help­ing you avoid the ex­cess and keep your pre­mi­ums and no-claims bonus.

You might feel you had a right to that.

But back to the two re­ported cases – the nun’s car door and the Fer­rari.

The in­sur­ers in both cases ap­pear to have been chanc­ing their arm with the other in­surer and I doubt se­ri­ously whether ei­ther would have tried or have been able to prove their claim for dam­ages in court. Take the case of the child. An in­surer told me to get a court to ap­prove that claim it would have to show that the child had a his­tory of the be­hav­iour which caused the ac­ci­dent, that the par­ents were aware of that pat­tern of be­hav­iour and that they failed to take ad­e­quate pre­cau­tions against it.

That brings us back to the unique abil­ity of in­sur­ers to ap­pear heart­less, and I think it re­lates to the in­tensely process-driven na­ture of in­sur­ers.

They han­dle a lot of claims. When a claim comes in and their pol­i­cy­holder says they were not at fault, they feel out whether they can claim a bit of cash from the in­surance of the party their pol­i­cy­holder says was at fault.

They send out a let­ter to see whether there is a pol­icy there to claim from.

They owe it to their pol­i­cy­hold­ers and their share­hold­ers, and on oc­ca­sion it makes them look un­feel­ing.

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