Tag Archives: indemnity

Understanding Goods In Transit Insurance (Part 1)

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Goods-In-Transit insurance policy (GIT) provides a cover for the insured against loss of or damage to goods following the perils of the road which could be an accident or armed robbery attack involving the conveying vehicle.

It is imperative to note that as the name implies, this policy covers “Transit Risk” only. What this means is that cover commences only when the conveying vehicle or ship leaves point A and ceases immediately it gets to its destination. Whatever loss or damage there may be before or after the transit is not recoverable under the ambit of the policy.

GIT relates to movement of goods;

(A)  By land; be it road or rail that is within a territorial limit

(B)  By water; this is also limited to inland water ways only that is within a geographical location for example Nigeria. Movement of goods by water between countries is covered under the marine cargo insurance policy.

GIT Insurance Policy comes in 2 types of covers;

(A) Restricted Cover This covers only loss of or damage consequent upon accidental collision or overturning of the conveying vehicle. Under this arrangement, loss of or damage to goods which is not as a result of an accidental damage (collision or overturning) to the conveying vehicle is not covered.

(B) All Risk Cover – This type of arrangement provides indemnity against loss of or damage to goods by fire, accident, theft or pilfering while the goods are being loaded on, carried by or unloaded from the conveying vehicle and while temporarily garaged during transit.

GIT INSURANCE Policies can be arranged in two methods;

(A) Single Transit; this is a one-off arrangement. The proposer gives the description and value of goods to be carried as well as details/particulars of the conveying vehicle. The period of the transit is also stated. As soon as the goods reach the specified destination, cover terminates irrespective of the expiry date of the state period.

(B) Open Cover (Annual Basis); Under this arrangement, the proposer gives full description of goods stating the Estimated Annual Carrying (E.A.C) as well as the Limit Any One Carrying (L.A.O.C). The L.A.O.C is the monetary value of goods the insured intends to carry per transit. The L.A.O.C represents the maximum liability of the underwriters in the event of a loss. The E.A.C is gotten by multiplying the L.A.O.C by the number of times the transit is expected to be made  per annume .

Some Factors insurers consider before granting a GIT cover;

(1) The nature of the goods; Are they perishable items, inflammable items, liquid substance, or are they brittle in nature? The nature of the goods is used to determine the degree of risk and exposure, and the possibility of salvage recovery in the event of a loss.

(2) Mode of conveyance; Is the insured using Own vehicles or Hired vehicles. Owned vehicles gives some assurance of a level of control. Hired vehicles poses as a high risk. The insurer is usually interested in the type of arrangement between the insured and the transporter.

(3) Destination; in not too distant past, insurance companies were reluctant to grant GIT covers for goods been transported to some northern parts of Nigeria because of the level of unrest and terrorist activities that was prevalent in that area.

(4) Insured’s Security Arrangements; where the insured is using an escort, the insurer has a degree of assurance on the safety of the goods. Where there is a tracking device on the conveying vehicle, it gives the assurance that the progress of the journey can be monitored .

(5) Mode of Packaging: IMG_20180412_044827_675

Of interest to an underwriter is how the goods are to be arranged and packaged to reduce the effect of an impact thereby protecting the cargo from being damaged. 

To be Continued…

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THE CHALLENGES WITH MOTOR CLAIMS ADJUSTMENT (PT.1)

Motor Insurance is about the most popular of all the various classes of insurance in Nigeria and understandably so. It is an everyday risk and the very nature of an automobile easily brings to mind the risks attached. Besides, in Nigeria, it is a criminal offense to drive an automobile without having at least a Third-Party Motor Insurance cover (read more on Third-Party Motor Insurance cover “here“).

Motor Insurance also has the highest frequency of claim and like other classes of insurance, it comes with its own challenges.

As a loss adjuster, I witness on firsthand basis, the effects of people’s misconception about insurance and many times their deliberate attempt to swindle underwriters into paying a loss that never occurred or deceive them into paying more than is required. I however must also point out that many people do not believe in insurance and it is at the point of claim that underwriters have the opportunity to prove that insurance is for real.

A claimant once insisted that he maintains his car with a particular standard auto garage and would not have his car repaired anywhere else. On my visit to the auto garage i requested for his service history from which it was observed that his claim was not true. Being a difficult client that he is we opted to pay the auto garage directly. It was at this point that he started to sing another song. Apparently, if he had been paid directly, he would have taken the vehicle to where it would be repaired cheaper thereby benefiting from his own loss.

Areas of challenge with adjusting Motor Insurance claims

  1. What constitutes a loss claimable under the Motor Insurance policy: Not every damage to a vehicle can be paid for by your motor insurance policy. As a matter of fact, if underwriters were to go by the strict wordings of motor insurance policies, over 50% of motor insurance claims would be treated as “not claimable”. A claimant once got back to where his car was parked only to discover that someone had drawn a long line on it using a sharp object. He reported a claim and requested that insurance should bear the cost of painting the said car. While it is true that the vehicle was damaged, such loss is not covered by the motor insurance policy. Another that is like it is when an insured is effecting a complete body works on his vehicle and attempts to transfer the cost to his insurer.
  2. Challenges with determining the degree of indemnity: The purpose of insurance is to return you (as much as it is practicable) back to the position you were before the loss (not better than). Insurance can only repair that part of your vehicle that was damaged. Anything more is “overcompensation”. This implies that you cannot request your insurer to bear the cost of painting the whole vehicle because painting only the affected part could result in “multi-shade of colours” – now, this is quantifiable. A claimant was involved in an accident that resulted in damage to the rear booth and bumper of his car. The point of argument was when the estimate of repairs submitted included the cost of painting the entire vehicle instead of the damaged area. While it is indeed arguable that painting the affected parts might make some parts of the car appear newer than the others, painting the entire car would also amount to the insured benefiting from his loss, and that is against the principle of indemnity. At best, the insured is made to contribute to the cost of painting.
  3. The challenge of unrealistic expectation by the insured: A claimant once requested a replacement vehicle having damaged his. Such offer of course doesn’t come with a standard motor insurance policy in Nigeria. Another claimant once insisted that is motor insurance policy be responsible for the cost of servicing his car following an accident which had nothing to do with any mechanical component of the car,
  4. Fraudulent intent on the part of either or both the insured and or the third party auto garage. Often times we have the cost of repairs inflated unjustly. At other times, the damage claimed for did not occur and at other times, the subject matter of insurance does not exist, yet the insured wants to be compensated for a loss that did not happen. I once had a case where investigation revealed that the insured instructed the repairer to further damage the vehicle so has to enable him get more benefits.
  5. Non-availability of adequate and verifiable database. This particular challenge is not peculiar to the Nigeria insurance industry alone, it cuts across virtually all other sectors of the economy. Recently, the insurance regulatory body in Nigeria, NICOM, has made giant stride in this regard by the introduction of the Nigeria Insurance Industry Database platform. However, there still exist cases where there are as much as 2 to 3 insurance covers on a particular vehicle by different insurance companies. There has been cases where an insured lodged a claim on the same vehicle and incident with four different insurance companies.

Thank you for reading. We would like to have your view and also know if this post has been of any benefit to you. Kindly leave a comment.

MY RIGHTS TO YOUR PROPERTIES…I PAID YOU OFF

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In an insurance contract, responsibilities flows between both the insurer and the insured. And with responsibilities comes duties and rights.  Indeed as an insured, you have the right to have your losses mitigated. The insurer also has the right to recover their outflow on your claim too.

Another of my responsibilities to my principal is to retrieve from an insured, properties which were subject of an insurance claim where the claim is being treated as a total loss (either actual or constructive) and the insured has been or is to be paid off. Continue reading MY RIGHTS TO YOUR PROPERTIES…I PAID YOU OFF

EATING YOUR CAKE AND HAVING IT BACK

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Mr. XYZ took up a comprehensive motor insurance cover on his brand new car which he got for N7,500,000.00. Since the insurance premium payable would be based on the value of the vehicle, he decided to reduce the value to N3,000,000.00  so that he would not have to pay so much in premium.

Some months after, his car was involved in a ghastly accident and the cost of repairs was about N2,500,000.00. In settling his loss, his insurance company, having weighed the amount he was claiming to the sum insured, opted to treat the claim on a Constructive Total Loss(CTL) basis. By this option, it means that the insurer decided that based on their records, the vehicle was beyond economic repairs. Mr. XYZ was offered the sum of N2,800,000.00 (after all deductibles) in settlement of the claim.

Mr. XYZ found himself in a fix. The amount he was offered was not even up to half of the value of the car but he couldn’t afford to repair the car himself. However, accepting his insurer’s offer would require that he forfeits the damaged car to them in line with the conditions of the insurance policy.

You obviously cannot eat you cake and have it back. Continue reading EATING YOUR CAKE AND HAVING IT BACK

WHY YOUR FIRE INSURANCE POLICY MAY NOT PROVIDE FULL INDEMNITY

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It is a general belief among the insuring public that the purpose of taking up an insurance cover is to be returned to the position previously enjoyed before the occurrence of a loss event. In my years of experience I have found this to be largely a theoretical truth as in actual fact, there are many factors that could prevent full indemnification.

Many of these factors are the application of clauses and policy conditions that only becomes known to you (the insured) at the point of claim. Continue reading WHY YOUR FIRE INSURANCE POLICY MAY NOT PROVIDE FULL INDEMNITY