The purpose of insurance is to provide financial compensation in the event of a loss. Therefore, if an insured suffers a loss or an accident and if the loss is covered by his insurance policy he can make a claim against his insurer. Making claim is simply an application by the insured for the payment of monies due under his insurance contract.

 Claim Procedure

Before an insurer will pay a claim, certain conditions must be satisfied.
A loss or insured event must occur. The insured must suffer some
financial loss before compensation is paid.

This is the case in non –
life insurance. For life insurance, the insured event must have taken place, such as the death or survival of the insured. The insurer must be notified. Insurers usually request further details
and completion of a claim for when they are notified of a loss. Proof must be provided. The onus is on the insured to show that a loss or event covered by the insurance has occurred. The insured must also prove the extent of such a loss.

Notifying the Insurer

Most insurance policies require a loss to be notified in writing within a specified number of days from the date of occurrence. This could be seven, fourteen or thirty days. This notification clause must be complied with as non–compliance may give the insurer the right to avoid paying the claim. However, in practice insurers usually consider date notification on each individual merit.

Initial verbal notification may be made as soon as possible followed by a written notification. The insurers usually would send claim forms to the insured immediately they receive notification verbally or in writing. A claim form is simply a questionnaire asking for details of the insured, details of the loss, or damage or destruction and of the time, place and nature of the loss, name at the time and place of loss. Claims are not usually paid unless and until this formation has been provided.

Proof of Loss

It is the duty of the insured to prove that a loss has occurred and to demonstrate its size. This may be done by the insured given full particulars of the loss, or documentary proof of the loss. For example, in personal accident insurance, any claim must be accompanied by a medical certificate; a medical examination by the insured’s medical doctor. In motor insurance, a theft loss must be accompanied by a police report, original particulars of the vehicle and purchase receipt. In marine insurance, claims are investigated by an independent surveyor and in fire insurance large claims are investigated by an independent loss adjuster.

Once the insured has demonstrated the loss, if the insurer wishes to take advantage of an exception in the policy it is up to the insurer to prove that the exception holds.

Claims That Fail

An insured’s claim may fail for the following reasons:
The insurance contract is invalid or had been invalidated
The loss is excluded
The claim is contrary to public policy.

 The Cause of Loss

Insurance policies cover losses that are specified. Thus the standard fire policy will not pay claims on buildings which are blown down by high winds or blown up by explosions, but it does cover buildings damaged by fire.

However the causes of loss are more complicated than these losses of related causes, factors or events; or

A chain of related causes, factors or events; or

Several causes may occur together;
Several unrelated causes
The insurer must therefore discover the time, real or proximate cause of loss. Only if the contract covers the proximate cause will the insurer pay the claim. For example, a personal accident policy specifically excludes losses caused by sickness and ill health. If a policy holder has a heart attack while cleaning windows and falls from the ladder, and as a result breaks his neck and dies, the proximate cause of death is the heart attack rather than the fall and a claim will fail. However, if his ladder breaks and the fall brings on a heart attack from which he subsequently dies, a claim would succeed because the proximate cause was accidental. 3.6 The Size of the Claim

The size of a claim depends on whether the contract is one of indemnity or of reinstatement, a valued policy or a contract to pay a specified sum. Therefore, the size of a claim under a contract of indemnity will be determined by the principles of indemnity. The claim must be sufficient to place the insured in the same financial position after the loss as he was in before the loss. For example, the claim for property insurance is the value of the loss or damage of the property at the time and place of loss. For a large claim a specialist adjuster; engineer or surveyor is used

to assess the loss. In liability insurances, the claim payment is settled by the insurer directly with the injured third party, and is meant to reflect compensation for loss of earnings, pain and suffering, disability and legal costs. The payments are equal either to the damages awarded by the courts or to the amount of an out–of–court settlement.

The size of a claim under reinstatement contracts depends on the cost of rebuilding or restoring the damaged property in its original form, less any allowances for betterment.

For a valued policy, the size depends on the value placed on the property and the extent of damage.

Who Receives the Claim Payment?

Usually the claim is paid directly to the person or company that bought the insurance policy. However, there are certain exceptions such as are identified below:

  1. In a liability claim, the claim is paid directly to the injured third party.
  2. Where the policy is assigned, the proceeds from the policy will be made to the assignor.
  3.  In life assurance, death claim is paid to the insured’s legal representative or to the beneficiaries.
  4. Claims may be paid to another person by order from courts, although this is not common.

Payment by Mistake

Where an insurer pays a claim which should not have been paid, because no cover was in force for one reason or the other, the insurer is entitled to recover the mistaken claim payment except in certain instances, including that of gratia payments and payments made following a mistake in law or under legal obligation.

 Disputed Claims

In some cases, the insurer and the insured may disagree over the amount of claim payment or over whether a claim should be paid or not. In such cases, settlement should be made by negotiations between a claims official from the insurer and the insured or an independent loss adjuster and the claimant or by reference to the courts, or by taking the dispute to arbitration, for a policy that contains arbitration conditions.


The essence of the insurance contract is that the insurer agrees in return for the premium paid by the insured, to indemnify or compensate him in the event of a loss. Therefore, an insured who suffers genuine loss within the meaning and intention of his policy must be compensated. Insurers have the duty to ensure that insurance funds are not wasted; only policyholders who have suffered genuine losses are compensated.


We have seen that before a claim is paid both the insured and the insurer must follow certain procedures.

On the part of the insured, the loss must be reported promptly and within the required period of notification. Also, the insured must obtain a claims form and complete it with all the necessary supporting documents proving the loss and size of the loss.

Notification may be oral or in writing. The insurer on receipt of notification checks the following:
Whether the contract is in force
Whether the loss is covered

Whether the premium has been paid in advance

Whether the terms, conditions and provisions of the contract are kept He will then acknowledge receipt of the loss notification and send the claim form to the insured.

On the receipt of the supporting documents, the insurer decides whether the claim will be handled in house or he would appoint an independent loss adjuster to handle the claim. Small losses are usually handled in house, while large losses are handled by independent loss adjusters.


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