By Bob Tan
5 June 2018 5.13
What does Fire Insurance Cover?
Before buying property in Malaysia, it is mandatory that you purchase fire insurance. It is one of the requirement before any financial institution approves for the loan. But did you know this mandatory fire insurance normally just covers the reconstruction cost of the property and not the entirety of the belongings in the house? Learn more about insurances and how to avoid a claim rejection here.
This article however would like to point out towards the other kind of insurance for homeowners or property owners. Under this other insurance property owners can opt to pay a higher premium to protect the asset that lies in the property. However, insurance buyers should take note that inflation and rising cost of labour and resources can lead to losses due to cost of reconstruction or repair not tallying with cost insured. They should have their property and belongings reviewed yearly as per advised by General Insurance Association of Malaysia (PIAM) before renewing their policy.
Now let’s talk about the room for abuse here which is insurance fraud. When someone insures their belongings (in case point for businesses) they can always stage a fire for profit. While there are counter measures by the adjustors and investigators from the insurance company, there is always a chance to bring the case forward to a court of law.
A Case of Fraud
Before continuing let’s talk about some high-profile cases involving fraud. ASEAN SECURITY PAPER MILLS SDN BHD v. MITSUI SUMITOMO INSURANCE (MALAYSIA) BHD is one of the high-profile cases that happened almost 30 years ago. The case was ultimately deemed in favour of the paper mill, but not before going through three courts proceedings with the results being in favour initially by the High Court but to be denied later in a Court of Appeal before reaching Federal Court where a finality was given.
In summary, the case was awarded to the paper mill side upon no solid-proof that the incident was a case of arson. The witnesses and experts at the time did not rule out spontaneous combustion as well as part of it. However, upon reaching the Court of Appeal it was deemed in favour of the insurer. It was found that there was suspicious behaviour of the then chairman of the company. Later, a finality was presented in Federal Court when the order of the High Court be reinstated with cost due to as the quote below;
“Suspicion, however great, is insufficient to prove fraud which needs to be proved beyond any reasonable doubt.” – Court Proceedings, Malaysia Bar Council.
With every case being presented as fraud, it becomes a loss for everybody. Claims take longer to process as there is more investigations to be done to prevent fraud. There’s also the prejudice in public opinion when someone makes a claim for a substantial amount of money. Such as in the case above, public opinion at the time of the matter were highly against awarding the claim money. Money that should be award deservingly is withheld, and contempt from the public is given.
Food For Thought
Factories, warehouses and electronic shops sometimes have a large amount of outdated stock that can be sold quickly. Would it not be unthinkable that these properties are burnt down to regain the cost of purchase to buy newer, easier sold products?