The panel of experts that comprise the territory’s one-year-old Insurance Tribunal says the term ‘underinsurance’ — which consistently has been used by local insurers after the 2017 hurricanes — is not a ‘scam word’.
The tribunal made that clear amid recent statements from Virgin Islands Party (VIP) Chairman Andrew Fahie, who has been describing the term as a scam, suggesting that local insurers have been defrauding insured residents.
Insurance expert and tribunal member Violet Gaul contradicted Fahie’s statements while answering questions from members of the media at a conference on Thursday.
“Some persons have described underinsurance as fraud but underinsurance is actually a term that you’ll find in the insurance policy — your homeowners’ policy,” she said.
She further noted that underinsurance might be viewed as fraud if, for example, it is confused with ‘coinsurance’. But Gaul said there is a major difference between coinsurance and underinsurance.
“There is a coinsurance clause in most homeowners policy where if the insured [person] insure their property for 80 percent of the value of that property then no penalty applies. However, if you insure your property for half the value of the property, then the underinsurance clause will apply. But both clauses are part of your insurance contract,” Gaul said.
Public education needed on insurance
She said she believes persons generally don’t pay deep attention to the insurance policies they sign.
“People need to be educated about insurance and I think that’s where a lot of the problems came from,” Gaul said.
“There is a lot of ignorance all around,” added tribunal chairman and attorney, Jack Husbands
He said: “Most people weren’t aware of underinsurance. [They] haven’t even heard the word. And I’m talking about lawyers who studied insurance law. A lot of people were not aware.”
Laws needed for insurance companies to highlight ‘fine print’
That said, Husbands and the tribunal are now considering to recommend that the local insurance laws be amended to compel insurance companies to write policies in a way that better inform persons to concepts like underinsurance straight away.
Husbands said: “We will be making a report to the Financial Services Commission on whether Section 71 of [the territory’s insurance laws] should be broadened [in relation to] questionable ‘fine-printed policies’ and what should be done to draw the attention of the insured the conditions that people generally called fine print.”
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