Blog Question: Concessions Agreement
I received the following question on the Concessions Agreement:
I note the ISR policy still has the “Concessions agreement” clause. Is this still relevant and how does it actually apply in terms of any claim?
David [surname and email provided]
I replied as follows.
The Concessions Agreement was from a different age. It really died, after many decades in the 1990’s. The Concessions Agreement, as a claims person, I always thought favoured the insurer as it meant that even if the Insured committed fraud, the finance company were protected.
The Mark IV ISR was first released in 1987 and updated in 1990 with the Mark IV Modified Wording. It has remained unaltered in the main since then by the majority of the market although some international and cluster group brokers have made recent changes.
Until now the changes to the base wording have been done by endorsement not by changing the wording itself.
Notwithstanding this, as the Concessions Agreement died, the clause itself died although bank and finance companies often require that they be named or noted on the policy. Some go further with a Loss Payee Clause which I fear provides too much power to the finance company and I urge that this be resisted as much as possible. What this new clause means that, unless it states to the contrary, any funds from a claim go to the finance company and if they use this to pay down the loan the premium paying insured may not have the funds to reinstate the asset. In turn this means they will not fulfil the provisos within the Reinstatement and Replacement Memorandum and the policy could well revert to one of Indemnity, thereby losing one of the most important benefits of the policy.
As we assist with the development of new versions of the ISR we remove all reference to the Concessions Agreement, for as I say it no longer exists.