The government says it will seek to make insurance companies provide simple explanations of their policies’ small print to customers to help avoid misunderstandings when it comes to payouts.
Disputes arising from insurance payouts following hurricane damage to homes and property on the islands have prompted the government to seek clarification on average clauses.
Leader of Government Business Kurt Tibbetts, speaking at a Cabinet press briefing on Thursday, said the onus would fall on the insurance companies to ensure they had fully explained the policies in plain English to clients.
‘All it would take is a signature,’ he said. ‘The policyholder would sign a form saying this has been explained to me.’
Minister Alden McLaughlin said an amendment would be made to the Insurance Law obligating the insurers to fully explain policies.
One controversial element in insurance policies, which has led to some policyholders believing they have been short-changed, is the ‘average clause’.
Mr. Tibbetts read an explanation of the clause, provided to him by the insurance industry. It explained that when contributions to a pool of funds are not made equally by the contributors, some of whom may not insure their property to its full value, the pool becomes under-funded and cannot pay the claims. To restore equity to the pool, an underinsurance, or average, clause is included. This indicates that if the sum insured is less than the replacement value, the policy holder is responsible for the uninsured portion of any claim payable.
The average clause in use in most property policies in Cayman contends that as long as the value of the property is at least 85 per cent of its full value, the average clause is not imposed.
Mr. McLaughlin acknowledged that the dense language of some policies meant many individuals did not fully understand the average clause or other elements of a policy and therefore it was necessary for insurance companies to ensure that policy-holders were fully cognisant of what they were signing.