Concerns over insurance
A recent incident in Sri Lanka's insurance industry has raised significant concerns about the ethical conduct and professionalism within the sector. While insurance is meant to provide protection and support in times of crisis, the actions of some players in the industry have come under scrutiny.
In a recent case involving a well-known export company with a distinguished board of Directors, a major insurance provider declined to fulfill its obligations despite having previously advanced funds against the same claim.
The refusal was based on the assertion that the presence of petroleum residue on the debris indicated arson, suggesting fraudulent intent on the part of the policyholder.
Notwithstanding the company's explanations regarding the nature of the equipment involved (it used a large quantity of hydrocarbon based solvent) and the circumstances of the fire and pointing out that given the scarcity of resources due to the ongoing ‘Aragalaya’ at that time and the inability to of any company to import equipment even if they wished to, the insurer remained unmoved.
Moreover, instead of adhering to established insurance etiquette, the insurer proceeded to tarnish the company's reputation by spreading allegations of arson throughout the industry both in Sri Lanka and with reinsurers. Insurance etiquette does prohibit an insurer from maligning a client. Insurers do have a duty to act in good faith and deal fairly with their customers. Thus making false or defamatory statements about their customers, whether or not a claim has been concluded, is unprincipled behaviour.
The fact that the courts confirmed that there was no crime committed and the government analyst confirmed that the traces of petroleum found in the debris was consistent with what was used in the machine did not seem to have convinced the insurer.
Such behaviour not only violates the principles of good faith and fair dealing but also raises questions about the integrity of the insurance industry as a whole. It is essential for insurers to uphold ethical standards and refrain from making baseless accusations that could harm their clients' reputation and rights.
The subsequent refusal of larger insurance companies to provide coverage following the allegations further underscores concerns about possible cartel-like behaviour within the industry. This leaves smaller companies particularly vulnerable, as they may lack the financial resources to challenge such abuse.
This incident highlights the need for regulatory oversight by government and intervention to ensure that insurers act responsibly and ethically. This will be essential if Sri Lanka wants to promote herself as an investor-friendly location.