The " Small Print " in Policies.

Now that the banks have had a shakedown - from top to bottom - the Royal Commission is about to move on to have a look at the insurance industry.  This is a massive number of insurers who operate in both property and life assurance and there is a guarantee that huge numbers of very dissatisfied customers will front the enquiry with their complaints.

This is an industry which relies on the fine print hidden away in the mass wording of conditions in the policy document that ensures that what seem legitimate claims are rejected when the policyholder needs the money.  Storm damage victims often find that their insurer splits hairs in defining water damage as caused by a " flood "  - which is not insured - when water penetration was caused by unusually heavy rain simply overcoming the usual drainage protection.   Very often the sum offered falls far short of repairing the damage caused.

Disability insurance is another in which claim definition can vary widely.   Claimants are often required to demonstrate stringent  " activities of daily living " (ADL ) tests before claims are approved.  These usually vary widely from the criteria used by the government when granting a disability pension.  Usually, claim rejection standards are as defined by the insurer.

In recent years, the insurance industry has combined with retailers to add pointless " protection policies " at the point of sale of some goods.  This provides the retailer with sales commission on the premium paid but the policy itself is virtually useless.   It contains so many " ifs, buts and maybes " that few people gain any sort of payout.

Even the life insurance industry is riddled with rorts.  Most life cover involves a medical examination and the disclosure of past medical history.  A policy that guarantees to pay a nominated sum of money on the death of the insured often contains clauses that void that payout if death is caused by events that can be attributed to that past medical history.

Many people remember a violent rain storm that hit the city of Wollongong in 1998.   Damage was widespread and the entire insurance industry initially claimed this was floods damage and refused claims.  When this was hotly disputed by the legal industry several of the big insurers relented and very quickly the event was accepted as a legal claim, but three insurers closed their local offices and moved away interstate.  Their customers received no compensation, and years after that event they returned to the city and resumed doing business, safely hoping that memories had faded.

Insurance is one of life's necessities.  We insure our homes against storm and fire and our lives against death when family and children need the protection of a breadwinner.  This Royal Commission can deliver certainty to policyholders if it insists that the policy document contains comprehensible language that the average person can understand that details exactly what risks are covered.

The likely outcome is that many of the shonky insurers in the business for a fast buck will be driven from the field and the insurance industry will gravitate to insurers of substance who offer policies with a predictable protection level. That is something that has been long overdue.