How Insurance Companies Take Advantage Of Policyholders To Evade Claims Settlement

Nigerian insurance companies are taking advantage of the ignorance of policyholders to deny their claims which is partly responsible for the low penetration of the insurance industry.

Nigeria’s insurance penetration rate stands at less than one per cent, according to an industry survey report released by Augusto and Co. in 2022.

The Nigerian insurance sector recorded 39 percent surge in gross premium to N312bn in Q1 2023, year on year.

Some of the big players in the industry like AIICO Insurance Plc, NEM Insurance Plc, AXA-Mansard Plc, Mutual Benefits Assurance Plc, Custodian and Allied Investment Plc, Consolidated Hallmark Insurance Plc and Cornerstone Insurance Plc paid over N116.64bn claim by the end of the third quarter of 2023 which is a rise from the N96.9bn paid in the same period in 2022

But the Chief Executive Officer of Finterate Projects, Ekerete Ola Gam-Ikon, told THE WHISTLER in a note that, claims remain an integral part of the insurance value chain and business models of insurance companies across the world.

He said before most insurance policies are accepted, pre-loss assessments are carried out by insurance companies through in-house and external assessors which become the basis for assessment when a policyholder makes claims.

The CEO said, “Too often, policyholders go ahead and change something as small as padlocks or as big as fenders and bumpers of vehicles without informing their insurers; and when claims are filed, the assessments reveal such differences that could become the basis for claims denial.

“The Insurers and Brokers that know quite well that the Policyholders would hardly read their Policy Documents and would not understand even if they read them, ought to ensure they understand those terms and conditions, so they are not seen to be taking advantage of the Policyholders’ inadequacies.

“The Regulators who equally understand the weak position of the policyholders in this regard and have been mandated by the insurance laws to protect the policyholders, should act, in such ways as expected, to ensure the policyholders or claimants have confidence in the process put in place to address complaints.”

When insurance claims are denied, Ola Gam-Ikon, said it could cause mental health issues for policyholders, integrity issues for claims adjusters and loss of confidence in the regulatory processes put in place to deliver effective and efficient settlement of claims.

However, the expert believes that unpaid claims are deterrents to the growth of the insurance sector in Nigeria.

He advised insurance companies to always demand data as evidence of what they need to be comfortable to take decisions at all times.

He advised them to “Act without delay once you have the data. Even if you have to verify, do so promptly, understanding that your action is either saving or damaging lives and livelihoods.

“Always appreciate those whose actions impact positively on us. For example, the submission of all documents in a timely manner by policyholders enable insurers pay claims promptly and they earn the credit in the market through additional businesses that the brokers give them; and

“Always seek to ascertain what other stakeholders are saying about you and if negative, develop a deliberate cause of action to regain lost confidence. This point concerns regulators far more than other stakeholders.”