PAYING OUT THE JUST CLAIMS

If an insured person suffers a loss as a result of the peril against which he has insured he is entitled to be indemnified for the loss. The correct procedure is to make a claim on an appropriate claim form. This form must as usual be completed with the utmost good faith, and will then be considered by the insurance company. The following points will enter into their considerations:

(a) Was the insured peril the proximate cause of the loss? If so liability exists; if not the claim does not justify payment from the pool of an indemnity sum.

(b) Even if the claim appears at first sight to be justified, are there any breaches of the conditions of the policy? For instance in a motor-accident policy there is usually a clause that the vehicle must be regularly serviced, the tyres must be in good condition, etc. If I wreck my vehicle after skidding owing to the bad state of the tyres my claim will probably fail.

(c) If the claim is justified, what is the correct amount which will indemnify the applicant? Many claimants do not understand indemnity and ask for the replacement price of the goods destroyed. We have already seen that the true indemnity figures takes account of depreciation and may be considerably less than the replacement price.

When a ‘fair’ valuation has been agreed the insurance company pays the agreed sum. If this is large they may find it necessary to borrow from their bankers or even to sell some of their investments in order to realize the money to pay the claim. When the liner Andrea Doria sank, British insurance firms paid 4 million pounds within a few days