NADIRA ISLAM, MAS: Insurance is a vital tool for financial security in times of uncertainty. Be it for an individual, a family, or a business- insurance builds a foundation of trust to tackle future risks. However, this foundation weakens when crucial information is concealed during the policy acquisition. Whether intentionally or due to a lack of awareness, many people hide important details, which later leads to severe complications. Recently, numerous incidents of claim settlement disputes arising from non-disclosure have come to light, which is alarming not just for the policyholders, but for the entire insurance sector.
The core principle and foundation of an insurance contract is "Utmost Good Faith" (Uberrimae fidei). This means the policyholder must accurately disclose all risks related to their health, income, occupation, pre-existing medical conditions, accidents, or other relevant factors. Based on this information, the company assesses the risk, determines the premium, and issues the policy. However, to secure a lower premium or to get a policy easily, policyholders often conceal vital information. The consequences of this can be severe.
When the concealed information is uncovered during a claim assessment, the insurance company reserves the right to reject the claim. As a result, the policyholder faces financial loss, and their family is left in uncertainty. Particularly in life or health insurance, such incidents can lead to social and humanitarian crises.
Loss for the Policyholder
Suppose an individual conceals their long-standing diabetes and heart disease while purchasing a life insurance policy. A few years later, if they pass away from a heart attack, the family files an insurance claim. If the investigation proves that the individual intentionally hid their medical history in the application form, the company can reject the claim. Consequently, the family falls into a financial crisis, and a negative perception of insurance is created.
Similarly, in health insurance, many people hide past surgeries or chronic illnesses. Later, during hospitalization, the company verifies past medical records and cancels the claim. Thus, the very financial protection for which the insurance was taken becomes completely ineffective.
Loss for the Company
Non-disclosure is not only a problem for policyholders but also poses significant challenges for insurance companies. Companies assess risks and set premiums based on accurate data. When a policyholder hides crucial information, the company issues a policy based on flawed calculations.
For instance, if a person suffering from chronic kidney disease conceals it while buying health insurance and later claims a large amount for medical expenses, the company gets entangled in investigation and legal complexities. This increases the company's administrative costs, wastes time, and creates financial risk.
Why This is Alarming
Crisis of Trust: First, non-disclosure creates a crisis of trust in the insurance sector. The general public often perceives that insurance companies intentionally avoid paying claims. Yet, in most cases, the problem originates from providing incorrect or incomplete information.
Impact on Honest Policyholders: Second, honest policyholders are also affected. Companies may raise premiums across the board to mitigate these hidden risks, negatively impacting the entire market.
Legal Complications: Third, it gives rise to legal disputes. In many countries, non-disclosure is legally treated as a breach of contract. In Bangladesh as well, providing accurate information is considered vital for insurance claim settlements.
Insurance is not a platform for deception; it is a relationship built on mutual trust and responsibility. Therefore, while concealing information might offer temporary convenience, in the long run, it damages the individual, the family, and the entire economy. To build a robust and credible insurance sector, there is no alternative to ensuring truthfulness and transparency.
Get insured, stay secure.
Author: SVP & HoD, Actuarial Function, Akij Takaful Life Insurance PLC.
