JOHANNESBURG – When an insurance policy is cancelled, many consumers tend to see it as unfair. In most cases, this is because they have not fully realised the fact that an insurance policy is actually a contract between two parties: the insurer and the insured.
The contract aims to protect the insured against certain risks in exchange for a premium and the insurer relies on the insured to provide an accurate and honest picture of the nature of the risk, based on the answers given to a set of questions.
The insurer does its best to assess what the risk is and bases the premium on that assessment. It stands to reason that if the risk changes or the insured breaches some of the terms of the policy, it has the option to cancel the policy.
If, however, the risk turns out to have been higher than originally assessed, the insurer can void the policy, in which case it is as though it never existed and all premiums will be returned.
By the same token, the insured is also at liberty to cancel the policy if he or she is dissatisfied in any way, or has found a better deal with another insurer. In that case, the insurer might make a counter-offer and if it is accepted, the contract would be amended to reflect the new terms and conditions. If not, it would be cancelled and the insured would enter into a new contract with another insurer.