by Nick Renton
|A SIMPLE REFORM OF THE GENERAL INSURANCE INDUSTRY TO AID CONSUMERS|
In the same way as a small number of citizens commit murder so a small number of citizens commit insurance fraud.
Fraudulent claims, if paid out, naturally lead to higher costs for insurance companies - costs which inevitably get passed on to honest policyholders in the form of higher premiums.
It is therefore understandable that general insurers should closely scrutinise all claims and reject any which they regard as fraudulent.
However, sometimes this leads to quite genuine claims being rejected, forcing those affected who are outraged by such an injustice and breach of faith to engage in expensive litigation and to incur great anguish and substantial delays.
Sometimes insurers even take full advantage of their greater financial strength by lodging appeal after appeal whenever they lose in a lower court, hoping that this will cause their successful policyholder claimants to give up.
It is unfortunate but little wonder then that the insurance industry has such a poor reputation in the community.
A SUGGESTED SOLUTION
In order to restore the balance in favour of consumers legislation should be enacted to provide that whenever an insurance company loses a court case it should be required to pay not only the contractual amount under the policy but also exemplary damages of, say, twice this amount.
This would discourage insurers from refusing to pay out on legitimate claims and exploiting their economic power to obtain an unjustified enrichment.