This part of my blog series goes hand in hand with my most recent blog post, When Words Collide: Insurance Policies as an Adhesion Agreement . While the latest post discussed the idea of an insurance as an adhesion agreement, which means that insurers usually have much higher bargaining power in the parties' contractual relationship, this blog post dives a little more into the overall "purpose" of insurance. ] Policyholders who have committed wrongdoing by their insurance companies in the past may have a sour taste in their mouth and question why they have only paid their premiums for their claim being denied. "If I pay my premium on time, follow all the necessary conditions and still have my application rejected, what is the purpose of insurance ?!"
The truth is that the overall purpose of insurance is to insure. The golden rule of insurance, according to author Bill Wilson, goes something like this:
& # 39; Never forget in everything you do professionally that the purpose of insurance is to insure and that the mission of this industry and all professionals in it is to help individuals, families and organizations to minimize their exposure to serious or catastrophic financial loss. “This starts with the insurance contract and ends with YOU. 1
In his book, When Words Collide: Bill Wilson solves insurance coverage and claims and describes the "10 commandments for the interpretation of politics." These ten teachings are important for everyone – from policyholders to lawyers to adjusters. Understanding these ten commandments will ensure that you, the policyholder, are ready and knowledgeable if you ever face a claim situation.
To repeat what the 10 teachings are, they are described as:
- Insurance is NOT a commodity  RTFP! (Read the ENTIRE policy)
- Do not accept denial of claims as gospel
- The purpose of the insurance is to insure
- All parties have an obligation to exercise good faith
- Most insurances are adhesion contracts, so insurance contracts are interpreted broadly, exceptions narrow and ambiguities in favor of the insured
- The burden of proof for determining the coverage rests on both parties to the insurance contract
- The duty to defend is broader than the obligation to indemnify
- Folklore is not a fact ] 2
The Insurance Information Institute describes the purpose of the insurance as:
Technically, the basic function of the property / accident insurance is risk transfer. The purpose is to reduce financial uncertainty and make accident losses manageable. It reimburses the payment of a small, known fee – an insurance premium – to a professional insurance company in exchange for assuming the risk of a large loss and a promise to pay in the event of such a loss. 3  Of course, not all insurance claims are handled in the way they should be handled. I probably would not have my job if that were the case. The purpose of the insurance is to insure and do it in good faith. Bill Wilson uses this quote when discussing the purpose of insurance along with the duty of good faith that insurers owe to their policyholders:
[There is a] requirements to fulfill the duty of good faith towards the insured. The most positive way to do that is to look for coverage in our policy and not to look for ways to deny coverage. 4
The insurance process begins with a policy that is extremely broad, so that it can meet the needs of many different insured persons. It is not until a statement is made, and the policy is analyzed and further investigated, that coverage may not actually be available. The insurer's duty of good faith must be used in this process so that claims that is to be covered are covered .
When discussing this point, Bill Wilson says that during the analysis of an insurance claim, "the assumption is that what happened is covered." 5 And that's where the policy interpretation policy, The purpose of insurance is to insure comes from. It is covered until it is not.
The year 2020 is now history. Let's start 2021 with the golden rule of insurance in mind and have a safe, risk-free new year.
1 Bill Wilson, When words collide: resolve insurance coverage and claim disputes (2018).
2 Bill Wilson, When Words Collide: Resolving Insurance Coverage and Claim Disputs 75 (2018).
3 Insurance Information Institute, Insurance 101, https: // www. iii.org/article/insurance-101
4 Bill Wilson, When Words Collide: Resolving Insurance Coverage and Claim Disputs (2018) (quoting 1983 Travelers Insurance Company claims the manual "Analysis of Liability Insurance" section
5 Bill Wilson, When words collide: solution of insurance coverage and claims disputes 82 (2018).