You may have encountered the phrase “Acts of God” when reading about news on typhoons, floods, earthquakes, and volcanic eruptions. This refers to any event that is accepted legally as outside of human control.
Though often used in insurance policies, the term was first seen in religious texts dating back to the 13th century. The French phrase “force-majeure" is its closest equivalent and refers to unavoidable accidents that cause a certain financial loss.
We interviewed Mr. Michael Rellosa, executive director of the Philippine Insurers and Reinsurers Association (PIRA) to once and for all clarify this issue. Here is a basic Question-and-Answer guide to understanding AOG based on his answers.
QUESTION: Is AOG a type of insurance?
RELLOSA: No. AOG is a type of peril that may result in a loss. You buy an insurance for AOG. But AOG in itself is not a type of insurance. QUESTION Why blame God for damages caused by nature?
RELLOSA: The insurance industry does not blame God when it calls typhoons, floods, earthquake, and volcanic eruptions as AOG. It is just a nomenclature invented by legal experts in Western countries which was later adopted by the rest of the world. It is by no means a way of putting blame on anyone, much more God. QUESTION: Why still call it Acts of God?
RELLOSA: In 2009, after the flooding caused by tropical storm Ondoy, the Philippine Insurers and Reinsurers Association (PIRA) which is composed of all non-life insurance companies in the country, has recommended the use of the phrase Acts of Nature (AON) in place of Acts of God. Many PIRA companies now use AON. QUESTION: Is Acts of God or Acts of Nature standard in insurance policies for homes and cars?
RELLOSA: No. AOG or AON remains a standard exclusion in the Fire insurance of your home or the insurance for your car. You have to pay an extra premium for such additional peril. In motor car insurance, you get it as AOG which refers to typhoon, flood, earthquake and volcanic eruption. For property insurance, however, typhoon, earthquake and flood are combined as one peril while volcanic eruption is treated as another separate peril. This is done to give the insuring party the chance to evaluate his or her risks and decide on buying insurance only for those that he or she is exposed to. QUESTION: How much is the extra cost for AOG or AON?
The cost is a minimum of 0.5 percent or half percent of the sum insured. So if you have a car that costs P1 million, you need to pay at least an extra P5,000 to insure it for AOG. It may look expensive at first glance, but if you think of the chances your car will be damaged by typhoon, earthquake, flood or volcanic eruption, that extra amount seems a very good investment. QUESTION: Can you buy insurance just for AOG without buying insurance for fire for your house or comprehensive insurance for your car?
No. The AOG — which, for property insurance includes only typhoon, flood and earthquake — is just an add-on to the Fire policy or an add on to the Comprehensive Motor Car policy. For property insurance, you have to pay an additional rate of 0.15%. The rate for volcanic eruption, however, is not fixed and varies from one insurance company to another. Insurance companies compute this rate based on the property’s proximity to an active or dormant volcano, as well as the historical events related to such a volcano. QUESTION: What do I need to show to my insurer to make a claim for AOG?
RELLOSA: The basic documentation to prove your ownership of the insured car or property, plus proof of the damage incurred. In most cases, these include pictures and certification from authorities that your area was indeed hit by the typhoon, earthquake, flood, or volcanic eruption. QUESTION: Do I have to pay anything when making a claim for AOG?
RELLOSA: Yes. Insurers usually require a deductible or participation fee for your claim. The deductible for AOG is the same as that of Own Damage and may vary depending on the insurance company. For typhoon, flood and earthquake claims in property insurance, it is often pegged at 2% of the affected item or a minimal amount, whichever is higher. For volcanic eruption, the deductible is never fixed.
FINAL NOTE: Insurance is a contract between the insured and the insurance company. As in all contracts, it is best to read what is included or excluded in the agreement to avoid confusion and misunderstandings when claims arise. If you have questions on anything about non-life insurance, visit PIRA’s website at www.pirainc.com or the Philippine Insurers and Reinsurers Association Facebook page.