Trust, does it survive in the modern world?
22nd October 2014
Modern insurance is thought to have started in Genoa around the 14th century. The big break came in the 17th century London mercantile market, in a coffee house run by a certain Mr Lloyd, way before Costa or Starbucks.
Over time the basic principle of insurance turned on ‘utmost good faith’ and ‘my word is my bond’. A hand shake secured a contract. Simple contracts were set out showing terms and conditions, the insurers looked it over and if they agreed, they signed at the bottom and so the term ‘underwriter’ was born.
In our modern world we have complicated the business (compliance and litigation) with quotes, (very) long wordings, subjectivities ad infinitum now the norm. Does ‘upmost good faith’ still exist?
We certainly hope so, Underwriters issue quotes once happy with the application, clients then sign the quote agreeing the terms and a contract is made. If someone then changes their mind, all trust is lost and it is difficult to maintain and rely on relationships.
A London newspaper recently highlighted a company’s plight and declined insurance claim, all because on a hot day a door had been propped open with a fire extinguisher. The extinguisher, we think, was returned to its proper place but the insurer dismissed a subsequent claim on the basis of this improper use and technical breach of terms and conditions, despite the claim being caused by something else.
Utmost good faith is therefore still essential: we need trust between insurers, insureds, brokers and solicitors, if people have a policy of insurance, they must be able to rely on it. I think of insurance as ‘a sleep easy’, if I doubt its reliability how can I ‘sleep easy’?
We here at QLP really do believe in the principle of utmost good faith, without it the insurance industry suffers and is devalued. As brokers we continue to have an important role making each side adhere to contract terms, long after the event of the sale (no pun intended).