asked the Minister for Industry and Commerce if he has satisfied himself regarding the practice of insurance companies who apply average clause to householders' claims and reduce insurance compensation for so-called under-insurance; and his views on whether this is ethical.
Written Answers. - Household Insurance.
61.
I am satisfied that the application of the average clause by insurance companies as a specific condition of an insurance policy is legal, ethical and equitable.
Where there is a total loss, an insurance company will pay out to the value of the sum insured; however, if there is under-insurance the policyholder will not recover the full value of the economic loss suffered.
If a home is insured for less than its full value, most insurance companies apply the principle of average. This means that any claims will be scaled down by the degree of under-insurance — so if a home is insured for only half the amount it should be insured for, the insurance company will pay out only half the cost of repairs. This makes sense because to do otherwise would require the assumption that the loss occurred only in the insured areas of the home. It is a matter for policyholders to make certain that they have an adequate level of cover in respect of risks insured by them.
62.
asked the Minister for Industry and Commerce if he will approach the insurance companies with a view to having a reduction in house insurance premiums for those members of the public who have house alarms systems.
Insurance companies base their premium levels and underwriting criteria on the incidence and cost of claims arising. As the Deputy is aware, my first responsibility is to ensure that companies meet their statutory reserves and solvency requirements and I cannot compel any company to alter its underwriting criteria.
I am aware that some companies offer discounts in relation to household insurance cover by reference to factors such as membership of a neighbourhood watch, installation of an alarm system and/or other home security measures, a claims-free history etc. It is up to each member of the public to shop around for the most appropriate insurance cover available on the market having regard to the particular circumstances in each case.