Are insurance contracts transparent enough?

Stanely Mwandama was involved in an accident in Lilongwe last year and his car had its rear windscreen completely smashed.

The rear fender was bent and the lens was also destroyed. When he went to his insurance broker, he was told that he has to pay a certain sum of money to the insurance company to redeem his car.

This angered him to the extent that he wanted to terminate his insurance policy with the company.

He suspected that the insurance company had some hidden conditions in the contract that he had signed because to him all the expenses on his car were supposed to be paid by the insurance company.

But according to some insurance experts all insurance contracts are transparent and customers must take time to study them.

According to Mphatso Kamzingeni who works for Real Insurance in Blantyre ,most Malawians think that there are hidden conditions in their insurance contracts, because they do not read the insurance policies.

“When a customer comes to insure their vehicle, they are just interested to get the insurance disk and stick it on their car and go. They do not take time to study all the conditions that are stipulated in the contract and in the event that there is an accident and you ask them to pay towards the repairs of the car they think that you are stealing from them,” said Kamzingeni.

He said some clients get involved in accidents deliberately and insurance companies have to safeguard themselves against such unscrupulous individuals.

“As insurance companies, we also face risks but my main advise to clients is to read their policies carefully once they have purchased one, to avoid the scenario where one thinks that the insurance company is stealing from them. In Malawi, people are interested to read bank statements but when it comes to insurance policies they are not keen hence the misunderstandings,” observed Kamzingeni.

As one way of sensitising the masses on the importance of insurance and how to understand insurance policies, Kamzingeni says insurance companies in conjuction with the Reserve Bank of Malawi (RBM) will have a Financial Literacy Week aimed at sensitising the masses on insurance and finance issues.

“The Financial Literacy Week is going to help a lot because people normally think that we are changing goal posts when its time to make a claim after an accident or when a policy has matured but in essence we are open and transparent,” he said.

Managing director of Express Insurance Brokers Limited Stephen Thomson, said as insurance brokers, their job is to translate policies on behalf of clients because most Malawians do not understand insurance issues.

Said Thomson: “Many people do not understand the insurance industry and that is why the insurance penetration is at three percent. Some people, even those well-educated, think that insurance is only for cars and there is need for more civic education to change the perception of the people as regards insurance.

“With more sensitisation accusations that insurance companies hide some of the conditions in contracts will go away.”

Explaining the role of an insurance broker, Thomson said that their prime function is to transfer risk, from client, the insured, to an insurer in the best and most economical way.

“We play so many roles in assisting clients and we try our best to give the most professional and innovative risk management and insurance advise in order to provide the best protection for client’s assets, profit and liabilities,” he says.

Thomson adds that some of roles played by a broker include evaluating client’s current insurance policies, to see how far these meet their business needs and whether there are any inadequacies, deficiencies or gaps in cover.

“We advise clients on changes in the insurance market and also formulate proposals for the development of a proper risk management programme.

“Apart from that we also identify, analyse and quantify risks, advising on loss control, risk reduction and self-insurance ,” he said.

He said these days customers must not complain that they do not understand policies because brokers are everywhere.

“Soon after independence many Malawians could not understand insurance policies because we were importing everything from the British but now most insurance companies have policies that are simple to understand as they are locally formulated to suit the needs of Malawians,” added Thomsom.

Vanguard Life Assurance sales agent Edna Phukwa said insurance companies these days are very transparent and no customer should complain that there are hidden conditions.

”I can accept that it has taken some time for people to understand the Insurance Industry, but now ,more and more people are buying policies and there is a change in the perception on insurance. The people who have insured their cars, children, houses and even their own life are the ones who are helping us get more customers with ease,” said Mbukwa.

As a way of removing the perception that insurance companies hide some conditions in their contracts Mbukwa advises that any client not satisfied with his policy must visit a broker or take time to read the policy until they understand it fully.