Understanding the human face of insurance laws

Someone once approached me for the meaning of “Ex-gratia” in insurance and how to go about it when your insurance company has turned down your claim on whatever ground they might have given. So if you have ever been in this situation, it is not the end of the world. You still have an option you could explore  to get a soft-landing.

“Ex-gratia” is a Latin word meaning “an act of grace”.

It is a plea for mercy and only used where there is no technical reason for a claim (loss) to be accommodated under a specific insurance policy.

We need to first understand that insurance companies are business entities with “profit” as their sole objective. However, they have a responsibility to ensure that their insureds’ losses are mitigated through effective claim settlement.

Your right to compensation under your insurance policy subsists because you have paid the required premium for the period during which the claim occurred. Having said this, it is also pertinent to state here that in as much as you have a right to your claim, your compensation is subject to the terms of engagement as detailed in your insurance policy document. And its interpretation would determine whether or not you are entitled to compensation and how much. It is therefore imperative for you to know your policy document.

The option of “ex-gratia” arises because a claim has been initially repudiated (rejected).

Why would a claim be repudiated?

1. The insurance policy doesn’t cover the circumstance of that loss

2. There is no insurance cover for the period of the claim

3. The required consideration (premium) is still outstanding

4. There has been a fundamental breech of the policy’s terms and condition

5. Fraudulent act on the part of the insured was established

6. The subject of the claim is not covered by the insurance policy

7. The insured was unable to adequately document the claim.

On the above grounds, your claim could receive a technical knockout.

“Ex-gratia” is a plea for leniency and it hangs on the appeal for consideration by either the insured and or the broker/agent. However, before such consideration is granted, the insurance company would take into consideration the following factors;

1. That they are convinced that you (the insured) have indeed suffered a loss

2. Compare the amount claimed to the premium paid on the policy. Where it isn’t much, you might be considered.

3. Your claims profile/records. If you are a regular claimant, your chances are slim.

4. Value/volume of businesses generated from the insured (you).

5. The economic benefit of settling the claim. If settling the claim would open up new businesses for them, they might take the risk.

As a business concern, insurance companies would usually make such decisions where they perceive they have more gains than losses. It is therefore your duty to appeal to their business sense in order for you to qualify for the consideration.

In theory, the percentage of the claim to be paid on ex-gratia bases is determined by the insurance company. However, in practice, it is negotiable.


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.

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