Home insurance policies sold in Malta and in Europe : a comparative analysis

Abstract

A home insurance policy is known to be one of the policies mostly sold by an insurance company – in fact, home policies together with motor and travel are considered mass production business for an insurance company. A prospective policyholder would want to take up a home insurance policy to protect one’s private dwelling from unforeseen eventualities. The maximum amount payable under a home insurance policy is the Sum Insured, and it must adequately cover the total cost required for the Insurer to put the insured back to the same financial position prior to the loss. Every country formulates its policy according to characteristics and risks faced in that specific country. When drafting such a policy cover, the insurer has to keep these various distinctive elements in mind. This study has taken into consideration the different elements involved, aiming to compare and analyse both differences and similarities. The analyses will be revolved around home insurance policies issued in three different countries: Malta, Italy and UK. Two insurance companies have been selected from each of the foreign countries and their policies are compared to home policies issued in the local market – specifically by five Insurers. The study will note that not only the content of a policy differs in distinct countries, but also the factors having an impinging effect on the contents of the policy. The researcher identifies the imperative factors influencing a standard home insurance policy issued in the local market, by holding interviews with several Maltese insurance companies’ representatives. Local insurance companies mutually indicate resident competition as the most impinging factor. Due to the size of the market and its limitations, insurance companies need to be aware of their competitors. Respondents explained that an insurer must strive to attain the best product in the market, to thrive and maintain its market position, and above all, boost customer loyalty. Other factors have emerged from this study; including reinsurance arrangements, or even becoming part of a larger group of insurance companies; which directly influences covers issued by an insurer. In spite of the fact that a typical home insurance policy in Malta is issued in a standardized format, and using simplified structures and language to mitigate grey areas in policy wording, insurers still face misinterpretation issues. The study also derives measures an insurance company takes to ensure clarity and comprehension by all of its policyholders. These include both internal measures to ensure misinterpretation issues are kept at a minimal level and frequency, and commensurately, amendments reflected on the wording itself. After having recorded all findings and came to a conclusion, the researcher puts forward recommendations in the light of this study, recommending two new covers; adequate for the local market, and other recommendations based on the researcher’s findings throughout this study.