When exploring the importance of transparency and clarity in insurance policies, we look at both sides. Looking at this topic, I will think or expect the issue to come from one side, but I personally believe it is necessary and important for both sides.
Clarity and Transparency | Utmost Good Faith
We can't have an insurance company hide the true facts that matter to the prospects of an insurance policy. The same way, we can't have prospects not tell the full truth about their condition or situation, which would be considered misrepresentation.
Can the insurer also misrepresent information? I believe that is a term reserved for prospective policyholders. Though, in a way, the insurer can misrepresent information when the prospective policyholder is illiterate, unable to read for himself what the policy terms are, and is dependent on the explanation given to him by the insurer. Due to the reason for wanting to sell a policy, the sales personnel could twist the facts in order to get the prospective policyholder to purchase the insurance policy. A policyholder can lose a claim settlement due to misrepresentation on his part.
Issues caused by a lack of clarity and transparency
The major issue of insurance in Nigeria is the lack of transparency on the part of the prospective policyholder or the misrepresentation of what the policy does by the insurer, causing the negative stigma of what insurance stands for in Nigeria. Due to this major issue, insurance is viewed as an industry out to scam unsuspecting citizens.
This view is caused by the misunderstanding of insurance as a whole or the misunderstanding of the policy purchased by policyholders. This takes us to the "understanding" segment of this article.
UNDERSTANDING
A lot of work is required to be done on the part of the insurance industry to sensitize citizens of the nation on the purpose of insurance, what exactly it hopes to achieve, and what it is here to do. With proper dissemination of information and the passing of understanding to the public, this will in turn increase the rate of insurance penetration in Nigeria.
Humans are most likely to avoid situations they don't understand. By providing information or an explanation of what insurance stands for, there is a higher chance the public will grow interested in insuring their belongings. We can disseminate information using our trusted buddy, social media.
A stronger force that humans are more susceptible to is trust, and this we will talk about in the next segment.
TRUST
The biggest cause of the negative stigma of insurance in Nigeria is the lack of payment of claims. This is when a policyholder has insurance for a particular cover and has been paying their premium judiciously without fault, and when the loss occurs, the insurance company will not pay the claim settlement due to one reason or another.
This can be infuriating on the part of the policyholder. How can I not be eligible for such a claim settlement after all my contributions in the form of premiums? If I am not going to be eligible for one fabricated reason or another, says the policyholder, why then have you been collecting my money when you have no intention of paying a claim settlement once the loss occurs? This begs the question: What is insurance for then?
When insurance is viewed as unreliable (especially in a country where it is not mandatory in some cases), then that is bad for business. I mean, really, really bad. Because that is how information is spread, therefore causing the negative stigma of insurance in Nigeria. Once trust is broken, regaining it is a hundred times more difficult. Which is why we are where we are currently in the situation of insurance in the country.
The remedy I propose in company with that which I proposed earlier is for insurance companies to pay rightful claims in due time. Without its reliability, insurance will go nowhere in Nigeria. Secondly, the insurance industry should sharpen their senses in the face of policy holders or prospective policy holders who are out to dupe the system. And being able to differentiate them from the innocent ones who just want protection and peace of mind.
Although we are talking about trusting insurance firms, we should not deny the fact that some policyholders or prospective policyholders are not to be trusted by their word. It is human nature, one we can't do without. Therefore, the necessity of insurers' sharpening their ability to detect such.
This also raises the need to state clearly to the public or prospective policy holders that any form of misrepresentation on their part will call for the denial of claim settlement when such a loss occurs. As a basic penalty for misrepresentation.
Another proposed solution is this, because we are dealing with Nigerians, and in some areas of Nigeria, there isn't proper education. It is necessary to simplify the policies so they can be easily understood by any reader. And if need be, explain every possible complicated term that could cause misinterpretation. Which would in turn promote trust, understanding, clarity, and transparency in the insurance industry.
Therefore, promoting clarity, transparency, trust, and understanding in the insurance industry.