The small print that defines an Act of God

A worrying title for a claims article perhaps? Sadly, the phrase was being bandied around at the very early stages of the tsunami disaster, in the tabloids at least.

Many were expecting insurers to try to wriggle out of making payments, relying on the legendary small print, and expectations were being managed on the basis that this was an 'Act of God'.

Now, I get very annoyed when I see reference to Act of God exclusions - I always have, from way back doing my CII exams and learning for the first time what 'vis major' meant.

But as time goes on, and policies are written more and more in plain English, it worries me further that people are still talking about it. It's almost 'the big get out clause', the way we - the evil insurers - will avoid paying out any money when a big event happens, despite having happily taken peoples' cash over the years.

One insurance definition I have seen, describes an Act of God as "an unpreventable and unpredictable event which could cause loss or damage to buildings, land or vehicles."

The reference case law is from Nugent v Smith [1876] where it was described as "natural causes directly and exclusively without human intervention and that could not have been prevented by any amount of foresight and pains and care reasonably to have been expected".

Now don't you think that the average person in the street would look at either of those definitions and think that they describe exactly what they are paying their premiums for?

The real problem in the tsunami is that many policies are written on a 'defined perils' basis. This is very common. But an earthquake causing tidal waves is not something immediately picked up in all wordings - it certainly isn't 'weather' as we generally think of it.

Before we get too hung up on gaps in defined perils covers, let's remember that 'all risks' covers always have exclusions, and you could argue a greater risk comes from the creation of a false sense of security.

Some parts of the media simply assumed that not only did insurers have a great catch-all 'get out clause', but also that they would universally rush to use it. But what actually happened?

One of the most pleasant and surprising comments I had from the national press came as a result of insurers excellent work with people stranded out there.

One tabloid journalist said: "I really expected insurers to be difficult about cover, but I have been really impressed with the way these claims are being dealt with."

However, I have also had calls from newspapers solely focused on the areas where the consumer is treated unfairly. "What claims won't you be paying?" is sadly a question asked several times over the last week or so.

The overall impression I am getting is that in this event, insurers are actually being shown in quite a favourable light. So maybe what we have done is to reach a turning point?

I'm not talking about a turning point in how we handle claims, but maybe one in the public's perception of what we do.

Undoubtedly there are bound to be situations where the occasional claim will go wrong, and those will get attention. But if the terrible events happening in South East Asia have given people just a little insight into the great work our claims people do generally, that really could be the start of something good. IT

' David Williams is claims director at AXA Insurance