Insurers should consider ex gratia payment for Westgate mall victims

Business people who operated at the Westgate Mall salvage their belongings after the recent terror attack. Fotosearch 

By  Isaiah Opiyo

In Summary

• The goodwill gesture will help avoid misunderstandings, help in customer retention and foster the ‘We are One’ spirit

Last week’s announcement that local insurance companies will not compensate owners of motor vehicles razed at the Westgate during the terrorist attack almost took away my breath. It was surprising that the announcement came on the backdrop of the national campaign for unity in grief.

The spirit of oneness amongst Kenyans during the two weeks has been historical and exemplary as the support has been beyond the monetary value but of emotional significance as well.

As the casualties from the attack became overwhelming, the blood tanks in local hospitals were overflowing with blood from donors. This gesture in essence did not only reaffirm the slogan “We are One” but proved the oneness through sharing of blood.

Meanwhile, the cash contributions for those touched by the tragedy reached an historical figure of more than Sh100 million within a fortnight, followed by a national prayer day organised and attended by most local religious leaders.

While this was happening, those with businesses at the mall were taking inventory of the extent of the loss.

The financial losses incurred by businesses in the attack are huge that without a strong capital injection, most of the business will not rise again to operate.

Thus the recent announcement that local insurers will not compensate those who had not taken terrorism risks is self extinguishing for the industry that is still trying to increase the penetration of its services.

Although there is no direct liability on the side of the insurers, it is important to recognise that those whose businesses or properties have been affected are potential customers.

Due to lack of information or the insignificant frequency of terrorism occurrences in the past, many businessmen have never thought to take a cover against uncertainty from terrorism acts.

As a show of the Kenyan spirit of “We are One”, the local insurers should be empathetic enough to give an ex gratia payment to some of their policyholders who got affected through the attack.

Ex gratia payment refers to a compensation done by an insurer to a policyholder out of goodwill for damages or financial loss for which there is no contractual liability. It is simply a compensation made out of sympathy or empathy.

Ex gratia payment is not only helpful to the victims, but it is also necessary for the insurers.

First, ex gratia payments may be necessary as a goodwill gesture if there is the possibility of a misunderstanding with policyholders. For instance, there are those policyholders who took accidental disability covers but the circumstances of terrorism under which they incurred the injury were not covered by policy provisions.

It would be difficult to convince the policyholder that the injury was not covered in the policy. Rejection of such claims would lead to customer resentment and eventual loss of customers.

This is what occurred after the post-election violence of 2007 where many businesses lost assets to arsonists but failed to get any compensation as political destruction was not covered in their policy provisions.