Insurance companies’ duty can make them seem heartless
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.