We often hear the expression, ‘he acted in good faith.’ We need to understand what ‘good faith’ actually is and how important it is regarding car insurance.
DISCLAIMER
Because car insurance can be complicated, we would like to urge readers to regard this article as information only. If you would like to purchase a car insurance product, it is advisable to seek the professional guidance from a certified, financial advisor or do thorough research before making a decision.
‘GOOD FAITH’ IS THE FOUNDATION OF INSURANCE
Car insurance is all about a contractual partnership – the company provides cover, but the client needs to provide information in ‘good faith.’ The reason why accuracy of information is so critical to an insurance company is because that’s all it has to go on. The insurer works out the client’s risk profile, purely based on what the client has provided. The information is received by the insurer in ‘good faith,’ trusting that everything provided is correct.
WHY SHOULD THE CLIENT PROVIDE INFORMATION IN ‘GOOD FAITH’?
It’s not that the client is doing the insurance company a huge favour by providing accurate information. No, the client has to also realize that if he or she fails to do so, that lack of ‘good faith’ will come back to bite later on. “In what way?” you may ask. Initially, the client may enjoy discounted premiums for a while, because the driving history is at a so-called ‘low risk’ level. However, when it comes to claim time, insurers have all kinds of checks in place to confirm the veracity of all the client’s information. Who can afford to have a R100 000 claim rejected because some vital information was left out on purpose?
WHAT ARE THE ROLES OF THE INSURER AND THE INSURED IN A CONTRACT?
The insurer totally relies on the accuracy of the information provided by the insured. It is a well-known legal requirement that both sides in an insurance contract are expected to act with a deeper commitment. This requirement is termed ‘uberrima fides,’ or ‘utmost good faith,’ compared to the usual ‘good faith’ or ‘bona fides.’
INACCURATE INFORMATION IS NOT NECESSARILY DUE TO DISHONESTY
Some clients are quite flippant about the accuracy of the information they provide, not realizing how this could jeopardise any future claims. They don’t understand that any kind of ‘loss’ should be reported to the insurer. Rather be on the safe side and provide too much information than too little.
Surely, the client should also expect the insurer to clearly explain the vital importance of accurate information.
AN EXAMPLE OF INFORMATION THAT COULD BE GIVEN INCORRECTLY
Who the regular driver is, is of tremendous importance to the insurer. Everybody’s driving risk profile is different. Thus, if you, as the parent, tell the insurer that you are the regular driver instead of your twenty-year-old child, it will most likely backfire at claim time. It will come to light that the regular driver was your child, and not you. The ‘savings’ made through incorrect, low premiums could pale into insignificance in comparison to the huge loss of a rejected claim.
WHAT ARE THE CONSEQUENCES TO PROVIDING INCOMPLETE DISCLOSURE?
Once the insurer has established there was no dishonesty, but, for example, carelessness with information provided, the payout may comprise only a certain percentage of the total value of the claim. The second option is for the insurance company to ‘void’ the contract, which means that the contract is considered to be non-existent. This would result in premiums less costs being returned, whilst the claim would be rejected.
WHAT IF A DISHONEST CLAIM WAS MADE?
If, after a contract was signed, a dishonest claim was made, regarding a non-existing theft, the contract would be cancelled immediately. The bad news is that any premiums would not be refunded, and worst of all is that the motorist would have to disclose this cancellation when seeking new car insurance. Honesty is definitely the best policy.
HOW ABOUT BUYING AFFORDABLE CAR INSURANCE WITH PMD?
As a motorist, avoid falling into the temptation to provide incomplete information when buying car insurance. Remember how important it is not to jeopardise your ability to claim. Why not provide accurate information by purchasing affordable car insurance using PMD’s Online Insurance Purchase Platform? The whole process is easy and quick, and can be completed at a time and place that suit you. There’s no need to call anyone, except when you feel you need to. For that, you can use a call-back facility. Some audio and video materials are available as extra information.
Disclaimer:
This article was prepared by Eric Sandmann in his personal capacity. The views and opinions expressed in this article are the author’s own and do not reflect the views and opinions of Prime Meridian Direct (Pty) Ltd, FSP41040 (car insurance and life cover products). The views and opinions in the article should not be attributed to anyone but the author unless expressly stated. Nothing in this article should be relied upon as advice, this publication is presented for informational purposes only. No person should act or refrain from acting in reliance on any information found in this article, without first obtaining proper financial advice from the appropriate professional. The author makes no claims, promises or guarantees about the accuracy, or completeness, of any information linked from, referred to, or contained in this article. The author reserves the right, to edit and change the content of this article.