Advertising would have us believe that false insurance claims are the reason it’s so hard to get our money – but what’s the real picture?
FOR SOME TIME now, the Irish Insurance Federation (IIF) has been running an advertising campaign aimed at raising awareness among the general public about insurance claims exaggeration.
The radio version of the ad fraud depicts a nasty villain with an oh-so-sneaky nasal whine brazenly placing his hands in the pocket of an honest citizen and depriving her of an unspecified amount of cash. On the television, we get to see this blackguard in profile, his nose growing at an alarming velocity across our large flat screens. There’s even a gang of these crooks walking calmly through a supermarket in broad daylight, filling their trolleys with ill-gotten goods, chuckling through their stocking masks.
But is the situation as black-and-white as it is depicted? Are insurance companies representative of all that is good and honest in our society while the brazen, whining, sniggering, long-nosed liars are their antitheses?
Certain situations can severely test the honesty of the most upright citizens; situations such as finding yourself far from home and in need of medical treatment at a ski station, only to find on your return home that your insurers deign to give you only €60 out of an experience that cost you €300, assisted by turning ambiguous percentage references to their advantage. Or an experience where your car is smashed and the insurance company doesn’t tell you how much it’s worth until your two weeks of free car hire has almost expired – giving you little time to consider a valuation from the lower end of the spectrum.
What is the honest citizen to do in such instances? Does he or she have to right to feel aggrieved; to feel a sense of injustice towards the insurance company that they trusted would put things right without any quibble, or are they expecting too much and just failed to read the small print?
“More often than not, people don’t know what they’re covered for,” says one assessor who works for one of the five large loss adjustment companies in Ireland. His business covers domestic claims only. Preferring to remain anonymous, he also says that many people don’t understand that they have to pay an excess before the claim is settled.
They’re also often unaware, he says, about such principles as “wear and tear”. If a carpet is destroyed by flood damage, for example, it may cost €5,000 to replace it with a new one. But if the carpet is already 20 years old, is it fair to expect a new carpet? It’s not, according to this assessor, who points out that that very principle is normally clearly established in the policy.
In his experience, most people are content with the settlement, although he says “there will always be a certain element who aren’t”. Interestingly – and in contrast to popular perception – his role is not to reduce the liability of the insurance company. In fact, his company gets paid a percentage on the settlement figure, so the larger the pay-out, the great the fee is for his company. While not all companies in the industry operate like this, many of them do.
In the motor industry, it’s a different story. Loss adjustors are not normally used. Instead, an independent valuer is employed to place a value on the loss incurred by the claimant. How independent such valuers are is difficult to assess. Many of them are garages or industry professionals who receive regular work from their partner insurance company. According to a number of car dealerships contacted by Pricewatch, virtually all claims where the claimant is blameless are contested – some of them to degrees that would appear to be downright unreasonable.
Cork-based Bernard O’Leary had just (legally) parked his car in April 2009 when it was struck by a jeep in the middle of a busy town. The car was written off and a more serious potential incident was narrowly avoided when the force of the impact caused his car to mount the pavement.
“The owner of the vehicle came back. He had no issue with admitting responsibility: he said that it was totally his fault and that his insurance company would settle up with us. We thought it was straightforward enough. Our company sent out an assessor initially, who looked at the car.”
The assessor, O’Leary explained, put the cost of replacing it at just under €6,000. This was considerably less than the €7,800 they had paid for it eight months previously, but the O’Learys were aware that it was a time when car values had decreased significantly. If a lower value allowed them to replace their car with a similar one, then they were content to take that.
The insurance company of the man who had crashed into their vehicle was one of the larger names in car insurance in Ireland. They wrote to the O’Learys, stating that they would be handing over the matter of valuing and subsequently settling their claim to their UK-based “valuation team”.
“They proceeded to tell us that you could buy a similar replacement car on the internet for €3,000,” says OLeary. The insurance company in question refused to take any more calls from the O’Learys on the matter, insisting that all queries be directed to their valuers in Britain.
“I would spend hours talking to these guys, but the conversation would always end in total frustration,” he says. “They simply had the calm and unyielding attitude that they would wear us down to the point where we would accept what they were offering.”
After months of non-negotiation and hiring cars to get around, the O’Learys resorted to calling on the services of a solicitor. Once pressure was applied from their legal representative, a settlement was reached. It was one that was below the initial valuation figure of €6,000 but which, Bernard calculated, must have cost the insurance company a lot more because of the additional costs incurred in the meantime.
“I’m sure that there are people who are ripping off insurance companies, but there are two sides to the story . . . We all pay insurance to cover that rainy day. But then, when it comes, you discover that the insurance companies are not the knights in shining armour coming to the rescue that you thought they were.”
Munster-based Chris O’Dell is another example of someone who had believed that his insurance company would come to his aid when he suffered a loss of damage to his boat. It took a full three years of dealing with insurance companies and ombudsman offices in two jurisdictions before he finally got a settlement to his claim.
In his initial claim for €3,700, he says, he had “kept the repair costs deliberately low” as he never wanted to claim for anything more than what needed to be spent to repair the vessel. The insurance company in his case held the view that the damage done was due to negligence on his part. It was a view they held steadfastly to until they were proven to be in the wrong after a serpentine and Kafka-esque route that took O’Dell first to the Irish Financial Services Ombudsman and then to its UK equivalent. By that time, he had long since sold the boat in question so as to be able to afford to pay the repair bill. The entire exercise has left O’Dell with a far more cynical attitude towards insurance.
“All the correspondence I had with the broker and the insurance company were on the level of defensiveness against the possibility of a dishonest claim. In other words, they start out with the view – in my opinion – that you’re dishonest and you have to work around that to persuade them that you’re honest . . . it’s the opposite of the principal of being innocent until proven guilty.
“I wouldn’t go down the route of exaggerating claims, although I can understand that it is tempting when they’re treated so badly by the insurance companies. I could have quite easily have put in a bigger claim, instead of putting a quotation involving secondhand parts and stuff like that.”
There is the school of thought that says that this is the reality of modern life: Business is business. When it comes down to a question of money, nobody wants to part with it without a struggle and you should always expect to have to fight for your own share. We all know that this is true, but when it comes to insurance cases, once it has been established that someone is entirely blameless in an incident, is it not unreasonable to expect an insurance company to put that person’s loss to right without any quibble? Is that not what is implied when you sign up for a policy on your car or on other possessions? And doesn’t, therefore, any form of reticence or deliberate undervaluing on the part of the insurer constitute a breach of faith? Dishonesty?
“No, I wouldnt accept that, says Michael Horan, manager of non-life assurance at the Irish Insurance Federation, when asked if some insurance companies make it difficult for people to make claims. “It is possible that you can have disagreements, but at the same time, insurance companies aim to make fair and just settlement with their customers under the terms of the policies. Fairness and honesty is a two-way street,” he says, citing the importance of “giving the correct and accurate information to the insurance company so that the risk is correctly priced”.
“When claims occur, that is their [insurance companies’] chance to display the claims service that they’re able to provide to their customers.”
