There are hidden clauses that loom large in policy documents and some are more sinister than others. Here I explain what the secret is, why it is dirty and how it’s still a secret.
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What is insurance companies dirty little secret?
The insurance market has a reputation of escaping from legal contracts using small print.
When businesses have a dispute they often seek legal recourse. The complainant will sometimes have insurance to cover such disputes. They ask their insurer to cover the cost of taking action yet policies prevent insurance buyers from taking action against insurance companies. Not much help if an insurance company has refused to honour the policy they issued.
Insurers do not make this clear. It’s difficult enough when commercial disputes arise, it’s galling to find that you have been given a false impression by the people you had invested in. Insurers paying claims want to reduce the most obvious or exclude them. It’s unfair when the exclusion prevents you taking action against a supplier that has obviously got something wrong – as is often the case when claims are badly handled. But for insurance companies to close ranks in this manner, that’s pretty low. Whatever their reasons.
Why it is dirty?
Because it’s industry wide, it’s tantamount to a cartel. Have all insurers secretly agreed that they will support claims against any industry except their own? If not, why hasn’t an entrepreneurial insurer stuck their head above the parapet and issued a policy that covers taking such an action?
Insurance disputes are common and it’s not always the broker that makes a mistake. Insurers are often culpable yet it costs almost £20,000 to take action against them. That is bad for UK business. Of course, it could be down to the fact that the insurance actuaries have worked out that insurers nearly always win cases. I suspect this is because complainants often run out of money to fund their legal case. If I’m right the figures will always be skewed.
Why is it a secret?
I doubt if insurance companies place this exclusion at the back of their policies by accident. It’s not front and centre as you would expect such a sweeping exclusion to be.
There are other secrets in policies that are difficult to unearth and comprehend. Yet the dirty little secret of not allowing your client’s to take action against your competition is the most sinister show stopper.
Wrap up: Insurance companies do not pay claims when the insurance contract between them and their policyholder has been breached. If they refuse to pay a seemingly valid claim policyholders need to dig deep to ensure they get what is due to them.
Spend time assessing the key risk to your business and make sure you understand your insurance policies which are legally binding contracts. Make sure that important contracts and agreements are not excluded from your policies.
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