I REFER to the questions raised by HS of Kangar regarding insurance claims (”Poser for person with many insurance policies” — NST, Oct 7).

They say ignorance is bliss. However, this is not true in the case of insurance. You must know what you are buying and the terms and conditions. The insurance document is transparent and spells out clearly the coverage, terms and conditions. If we don’t read it, there is no one else to blame.

Generally, a proposer is required to complete and sign a proposal form. Any other policies you have taken, especially those relating to the same class of business, must be declared. So, it does not mean that you can’t claim if you have more than one policy.

Most policies, however, are subject to the principle of indemnity, which means that you will be compensated for the loss or damage of your property based on the value before the loss.

The principle of indemnity does not permit you to make any profit from your loss. For example, if you have incurred a bill for RM1,000, you will be compensated for this amount regardless of how many policies you have covering your risk.

What the insurance companies will do is that they will “share” the loss and apportion the amount according to the number of policies you carry on a particular asset.

Theoretically, if you are paid RM1,000 from three insurance companies for this bill, you will be making a profit and this goes against the principle of indemnity.

This principle, however, does not apply to life and personal accident (PA) policies (for bodily injury or death claims). You (or your dependants in the event of death) can make claims from the various life or PA policies you have taken.

Your insurance contract is subject to the information provided in your proposal form and you must ensure that you declare your other policies to the insurer.

During the period of proposal to buy the life or PA policy, your prospective insurer will evaluate (or underwrite) the proposal based on the information given. Once the policy is issued, there will be no problem, should there be a claim.

You should deal only with qualified agents. Over the years, the insurance industry has undergone many changes and transparency is one of the key factors.

If you have any complaints regarding your policy or claims, you have three means of recourse. First, you can write to the complaints unit of the insurance company; second, you may write to the Financial Mediation Bureau (an independent body); and third, to the Customer Services Bureau of Bank Negara Malaysia.

This is no secret and the information can be found on every policy document. If all else fails, you can seek recourse in court.

I believe that the insurance industry is striving to upgrade the quality of its agents, but most importantly, the public should take keen interest in the insurance products they buy. They should not leave it to a third party and later, in the event of a loss, claim ignorance.

It is high time that insurance is taught as a living skill in schools.

C.T.K.

Source: NST – October 15, 2008