The contestable period is the period in which the insurer, usually the insurance company itself, has the right to cancel the policy or refuse insurance claims. if they are the insurance company finds that the customer, participant, insured party, or policy holder provides information that is not in accordance with reality to the insurance company in the process of requesting insurance coverage. This term in Indonesian is also known as “trial period”. For insurance companies, the right to refuse claims during the contestable period is very important. This relates to the burden they have to bear from the possibility that customers lie about their condition, so that insurance companies charge insurance costs that are not commensurate with the risk.
The length of the Contestable Period
This trial period or contestable period varies in length, there are insurance companies that provide a trial period of less than one year and some are more than one year. Generally this trial period lasts for 2 years. It is rare for an insurance company to have a contestable period of less than 2 years. The longer the trial period the more profitable the insurance company is. Because at this time the insurance company can cancel the customer’s insurance participation and refuse insurance claims. It is also useful as a protection for insurance companies from fraud committed by their customers.
Consequences of the Insurance Contestable Period
This is a trial period, during which the insurance company can cancel the customer’s insurance participation, and even reject the claims submitted by their customers. This refusal is carried out because the customer is proven to have provided false information or made up information so that participation in an insurance product can be accepted. Whereas insurance is a service company for risk control, not a company that bears the burden of its customers. Risk means something that might happen, not something that has already happened. If something is certain, the insurance company is not needed, and they will refuse the applicant’s participation because it is detrimental to the insurance company. So the consequence of the act of providing incorrect information by the customer is the cancellation of the customer’s insurance participation, and the insurance company has the right to refuse the customer’s claim.
Customers who are caught lying in providing their data do not always have their participation in insurance canceled. Usually the insurance company will ask the customer to increase their premium. So that the customer’s insurance costs are in accordance with the risks covered by the insurance company. For errors that are unintentional and do not have a major impact, such as mistakes in spelling names, writing down parents’ names, the age difference given to the insurance company and the actual age that is not much different, the insurance company asks the customer to correct it.
Purpose of the Contestable Period
This trial period aims to protect insurance companies from fraudulent acts of their customers. If there is no constatable period, the insurance company directly has the obligation to protect the risk that its customers have. Though the determination of the cost of this insurance is strongly influenced by the information from the insurance applicant. Insurance costs will increase according to the risk covered by the insurance company. If the customer lies, the insurance company bears a greater risk than the fees charged to their customer. To prevent this, a constestable period is enforced in insurance products sold by insurance companies.
Contestability period is the contestation period stated in the standard wording of life insurance policies, in which the policy contains the time limit required by the company to review coverage if at any time the policyholder is proven to have misinformed, such as notification of incorrect identity when registering as a customer. insurance. Usually the contestability period is 1 to 2 years depending on each insurance company.
The policy is used with the aim of protecting the company from fraudulent practices. Because usually insurance companies want to ensure that customers are not cheating or lying about information related to the health or lifestyle of customers that are reported during the insurance application submission process, in order to get the desired coverage value.
Example:
When applying for a mortgage loan at the bank, a person named ADI uses his parents’ names in the approval of the application. Previously he knew that his parents were sick and predicted his age would not be long. However, because he wanted to take advantage of the life insurance coverage that was bundled with mortgage loans, he reported the data on prospective customers, in this case their parents, with good criteria, all including their health. In the middle of the journey, still in the contestation period, it turned out that the customer had died. ADI tried to apply for insurance so that the mortgage loan could be paid off immediately, but the insurance company had a contestation policy so that they investigated it was proven that the data information provided at the time of submitting the credit application was only manipulation. So the company has the right to reject the claims submitted by ADI in accordance with the rules of the contestability period.
Goals of the Contestable Period
Prevent losses for insurance companies
Life insurance products usually offer contracts with varying terms ranging from 5 years to even 20 years. When the policyholder dies before the contract period ends, the policy issuer (insurance company) will pay the policyholder’s family (the insured) a large sum of money exceeding the total premium paid. But if it turns out that until the contract period ends it turns out that the policyholder is still alive, the insurance company will return all premiums that have been paid to the policyholder.
The concept is simple, healthy people (no history of dangerous diseases and healthy habits) tend to live longer than those who are unhealthy (have a history of dangerous diseases and unhealthy habits). The policy of the insurance company (policy issuer) is to offer insurance products to those who are healthy. So it is expected that all policy holders remain healthy until the end of the contract period and the insurance company does not have to pay a large sum insured to the heirs of the insured.
However, in this very complex world, there will definitely be a handful of people who try to manipulate the system, including manipulating their own personal and health data, so that they will have the opportunity to buy an insurance policy. So that when one day the buyer of this manipulative policy dies, the insurance company is obliged to pay the sum insured to the heirs of the insured in a fairly large amount.
The insurance company (policy issuer) of course does not want to pay a large sum insured if it turns out that the policy holder provides incorrect personal and health data. So that the “Contestable Period” was born, which is a period for a maximum of 2 years owned by the insurance company (policy issuer) to check the correctness of the data provided by the policyholder. If the policy holder is proven to have provided wrong personal and health data, the policy issuer has a strong basis for rejecting the sum assured claim submitted by the policyholder’s heirs (the insured).
