Cedric E. Stephens, Contributor
Question: My insurer recently cancelled my Family Indemnity Plan insurance policy. Although, I updated my contact information at the relevant credit union, it appears that notice was sent to the wrong address. Is there a basis in law that notice should be effectively served before policies are cancelled? Are insurers obliged to 'serve' notice? Has the company made a mistake? I have had this policy for over eight years and have benefitted from it when my mother died. I firmly believe that insurance is important and would not deliberately allow it to lapse. I feel that the company mistreated me.
HELPLINE: I learnt that you had a medical problem and were in hospital for some time during last month. It is my hope that you are now on the road to full recovery.
In the absence of the policy contract, I have had to contact your (note: not ex) insurance company. This was in order to get a better picture of the issues from the company's side in addition to yours. Had the policy been available, I would have expressed an opinion a long time ago.
The absence of the contract of insurance - aka the policy - goes to the heart of your problem. It shows that when you were sold the policy eight years ago, you did not fully understand what you were getting into. As a result, you were uncertain whether your insurer was obliged to provide you with a copy of the policy. You also felt that you "might be given a hard time" even if the company had a duty to give you a copy.
Massa day done! Insurance companies need you as much as you need them. Transact business with them - especially those companies that are owned by members - as equals and not as slaves! The law, after all, is on your side.
Part VIII, Section 125 of The Insurance Act says this about the replacement of life insurance policies. Where "(a) a policy holder; or (b) person claiming the benefit pursuant to the provisions of a of a policy, advises the registered insurer that the policy is lost or has been stolen, the insurer shall on the production of such reasonable evidence, issue a replacement policy to the person referred to in paragraph (a) or (b)."
Sections 107 to 113 of the Act deal with the protection of policies. One of these sections, 111, is about how a policyholder should serve notice of cancellation on an insurer. Section 112 sets out how life insurers should end contracts in cases of non-payment of premiums. It says: "(1) an ordinary long- term policy shall not be forfeited by reason only of non-payment of any premium if (a) not less than three years' premium have been paid on the policy; and (b) the surrender value of the policy (calculated as at the day immediately preceding that on which the overdue premium falls due) exceeds the sum of the amount of the debts owing to the company".
Sub-section (2) allows the insurer to charge interest on the debt while (3) states that the interest and overdue premiums are considered to be legitimate debts owed to the company.
Sub-section (4) prescribes how notices of cancellation should be given to policy holders before the contracts are terminated.
When contacted, the company head gave me with the following information which, presumably, was extracted from the contract that they issued to you: "All insurance under this Policy will terminate when: (1) The policyholder provides notice of termination; (2) We (the insurer) provide notice of termination; (3) When the policyholder fails to remit premium in accordance with the grace period provision."
No information was provided about the grace period.
He went on to say that: "All insurance under the member's certificate will terminate when: (1) The member withdraws from the plan; (2) The member ceases to be a member of the policyholder; (3) The member's premium payments are over thirty-one (31) days overdue. Insurance for unmarried, living children and dependent children under legal guardianship of the member will terminate when they reach age twenty-six (26) or marry, whichever occurs first" without making any explicit connection between the member's certificate and the policy.
Finally, he also stated that reminder notices are sent when customers' accounts are in arrears and that reminders were sent to you.
The company did not address whether it had discharged its statutory - as opposed to its contractual - duties to you when it discontinued your eight-year-old contract.
Specifically, it has failed to explain why section 112 of The Insurance Act does not apply to the policy you were sold and why it chose to ignore one of the laws of the land that was written to protect consumers.
In the absence of more and better particulars, I am forced to conclude that the company made a serious mistake when they cancelled your policy and apparently ignored provisions of the Act.
Cedric E. Stephens provides independent information and free advice about the management of risks and firstname.lastname@example.orgSMS/text message to 812-7233