Sunday 5th February, 2006


The uncertainty of insurance

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In Shakespeare’s, Merchant of Venice, the merchant Antonio quips: “My ventures are not to one bottom trusted, Nor to one place; nor is my whole estate, Upon the fortune of this present year.”

The bottom was the terminology of the day to refer to the ship’s hold where cargo was kept.

This reference to Venice during the era of the Renaissance is one of the early literary accounts of the practice of marine insurance in business. Merchants of the day would divide their cargo between many small ships, in order to avoid loosing the entire shipment should a ship go down.

These concepts formed the rational for such institutions as Lloyd’s Coffee House of London, when the interests in the ship’s fate grew, and was spread among the parties concerned with the safe return of the vessel to port.

By 1774, the Life Assurance Act, had become law in England, and its main import was to separate the concepts of gambling and speculating, from the pure risk of loss of income to the family of the breadwinner.

The idea of insurable interest was engaged to ensure that transactions in the emerging industry remained morally tenable.

Today, in most parts of the world, there are two types of insurances that seem to have been worked into the laws that apply to citizens, across the board, and made compulsory.

These are: social welfare insurance, and third party liability insurance.

Last week, we broached the subject of third party liability insurance, in terms of the quantum of money that can be claimed, in the case of death to a third party arising out of a motor vehicle accident.

A look at the typical motor vehicle insurance contract available locally, reveals a most complicated document. There are a host of references within the contract to memos and exceptions and schedules.

These are further complicated by amendments, attached to the Certificate of Insurance. The net result is that the average person never knows what he or she buys, seldom makes a claim, and may never be guided by the insurance provider, to claim what they are entitled to claim in the event of loss.

The adage “let the buyer beware” is little understood, and seldom employed by the buyer, but is a handy little tool, in the hands of the provider.

Let us look at the “excess.” Excess is really the self-insurance, or co-insurance factor that is invoked in every policy, except in Third Party Liability Insurance.

The legal requirement for all motor vehicles in use on the roads is Third Party Insurance. This by virtue of the risk that it covers carries no excess.

Comprehensive Motor Policies and Third party Liability, Fire and Theft Policies carry excess clauses. Some insurers sell waiver of excess, but hidden in that are certain exceptions to the waiver.

But what is self-insurance? It is the amount of every claim that is to be paid by the insured first. The insurer says to you that in the event of an accident or loss, you the buyer, will pay money first, before any kind of compensation is paid.

In general, the least amount of excess rings up at about $3,000. This category of excess, applies to the named insured. For the same vehicle, with named young drivers, the excess amount for the same accident can ring up as the first $12,000 of loss.

It really depends on who is in the driver’s seat, and the quality of mercy is irrelevant to the case, although it droppeth as a gentle rain from heaven.

Next week—social insurances

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Designed by: Randall Rajkumar-Maharaj · Updated daily by: Sheahan Farrell