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Friday, May 8, 2020

Automatic Renewal of the Munich-Re Property All Risks Insurance Policy

Automatic Renewal of the Munich-Re Property All Risks Insurance Policy

Property insurance policies that use the PAR (Property All Risks) Munich-Re wording have different characteristics than other property insurance policies, for example, PSAKI (Polis Standard Asuransi Kebakaran Indonesia) or Indonesian Fire Insurance Standard Policy).

The most memorable thing about the peculiarity of a PAR policy from PSAKI is the area of ​​risk coverage offered where generally the perils covered in PAR (which is based on all risks) is broader than PSAKI (which based on named perils). But the peculiarities of the PAR did not stop there. From another aspect, this policy has various "privileges" that benefit the insured, one of which is the provision of the policy renewal that applies automatically. This is, of course, convenience and at the same time provides a sense of security and comfort for the insured against the risk protection status of the insurance extension policy.

The Method of Policy Renewal in General

In administering policies approaching the expiry date, both of annually and long term policy, the insurer will usually send a notice of renewal to the insured about 1 (one) month before the expiry date of the existing policy. This refers to the policy period mentioned in the policy schedule which usually states that the policy will expire on the specific date and time stated in the schedule. For example, a fire insurance policy is declared valid for 12 (twelve) months starting from January 1, 2020, until January 1, 2021 (both days begin and end at noon the time the object is covered). Thus, if the insurer forgets to send the renewal notice to the insured (and the insured also forgets to submit a policy extension request to the insurer), then there is no agreement whatsoever between the two parties. If the object matter of insurance experiences a claim after the existing policy period has passed, the insurer has no obligation to process the claim because there is no legal agreement between the two parties. Objection filed by the insured because the insurer does not send a renewal notice does not necessarily claim to be further processed. This is because the insurer also basically does not have the obligation to submit such notification (unless specifically stipulated on this matter). So if the insured has a fire insurance policy that uses PSAKI wording, the insured must be careful and aware of the policy coverage. There must not be an empty time lag between the expiration date of the existing policy and the date on which the policy is extended (to prevent claims occurring within the empty time).

Automatic Renewal of the Property All Risks (PAR) Policy

In contrast to general insurance policies, in property insurance policies that use the Munich-Re PAR Wording (which has also been adopted by Asosiasi Asuransi Umum Indonesia or General Insurance Association of Indonesia), the insured gets a "special treatment" where even though the insurer does not send renewal notice (and the insured may also forget to submit a request for extension of the policy), then the renewal policy shall be declared automatically valid. The insurer is deemed to have agreed to bear the risk of the said policy for the next 1 (one) year from the date of coverage period ends. This is based on General Conditions Item 13 Period of Munich-Re PAR Wording which states, "The insurance is automatically renewed for a year unless Insurer or Insured request in writing the termination at the expiry date, giving 30 (thirty) days notice." 

Conclusion

If it is not specifically stipulated, administratively, the process of extending property insurance using Munich-Re PAR Wording should benefit the insureds because they do not need to worry about forgetting to submit a policy extension request to the insurers. The insurer is considered to have agreed to accept the risks that occur for at least 1 (one) year in the next period. This provision will only be cancelled if the insurer submits a written letter sent 30 (thirty) days before the end of the expiry date. On the other hand, the insured must also be prepared to bear the consequences of the obligation to pay the renewal insurance premium, unless it states otherwise by a written letter 30 (thirty) days sent before the expiry date of the insurance.

Property All Risks

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