Some basic things to know about insurance
Cedric Stephens Insurance HELPLINE
QUESTION: I have two vehicles insured with the same company. Last week, the policies were cancelled without any warning. Insurers say one of them was operating as a robot taxi. I tried to buy insurance elsewhere, but was told that I needed a report from the other company. When the report was presented, the company said that the vehicle could not be insured. It showed that $400,000 was reserved for damage to a JUTC bus. The accident occurred while the car was trying to avoid a head-on collision in August 2013. I know nothing about that incident. The insurer said I should write them a letter to that effect. They will investigate the matter before deciding whether to insure me. Is there anything else that I can do at this stage?
- S.T., Kingston.
HELPLINE: Your situation looks awful. Trying to source motor insurance following the cancellation of two contracts is bad enough. Doing so with an allegation that one vehicle licensed as a private car was being used as a 'robot taxi' plus a history of two or three collisions would cause most insurers to reject to your application or jack up your premiums.
It could be said that you deliberately violated the terms of the contract when you used one vehicle to carry fare-paying passengers, and further, that you broke the law/regulations relating to the operation of public passenger vehicles.
The process of buying motor insurance begins with the completion of a proposal or application form. The information in the form is used by insurers to make decisions. Should the application be accepted or rejected? If yes, how much premium should be charged?
The form is also part of the contract between you and the company.
The form that I looked at to write this article begins with two general statements. The first speaks to the applicant's duty to disclose information. It says, in surprisingly clear and plain language:
"Before you enter into a contract of general insurance with an insurer, you have a duty, under the law to disclose to us every matter that you know, or could reasonably be expected to know, is relevant to our decision whether to accept the risk of the insurance and, if so, upon what terms. You have the same duty to disclose those matters to us before you renew, extend, vary or reinstate a contract of insurance."
The second statement explains what can happen when the applicant fails to disclose information, either accidentally or deliberately.
"We may be entitled to reduce our liability under the contract in respect of a claim or cancel the policy. If your non-disclosure is fraudulent, we may also have the option of voiding the policy from its beginning. It is therefore vital that you make sufficient enquiries before you complete the proposal form and before you sign any declaration for the information given."
Many of the problems that insurance consumers face occur because they do not understand or ignore these basic things about insurance contracts.
The premium for motor vehicle insurance partly depends on how the vehicle is used. Your former insurer poses eight questions - which require yes or no responses - to find out how applicants use the vehicles that are proposed for insurance:
1. Social and domestic (including travelling to and from work) and pleasure only?
2. Solely by you in connection with your business?
3. Used by you in connection with your employer's business?
4. Used by your employees in connection with your business?
5. Used for hire or reward or in connection with a motor trade?
6. Used in connection with motor racing, trials and rallies?
7. Will the vehicle be used for commercial travelling?
8. Do you accept that the policy will only provide cover for the permitted use of the motor vehicle permitted above?
The application form ends by stating that the policy is "voidable if the proposer makes any false statement or withholds any material information".
There is also a declaration that the proposer certifies the accuracy of statements made in the application as "true and complete and that nothing materially affecting the risk has been concealed".
Taking into consideration all of the information that you have provided, the particulars stated in your ex-insurer's specimen application form and motor vehicle policy, I can see no grounds on which to challenge their decision to terminate your two contracts.
Errors in report
On the other hand, it is quite possible that there are errors in the accident report that your former insurers prepared. In the meantime, I suggest that you write the letter, sit tight and keep your fingers crossed until the investigations have been completed.
I made a shocking discovery when I looked at the proposal form of your former insurer. By signing the form, the proposer authorises the company "to share with other insurance companies, the Police and the Island Traffic Authority in Jamaica and any other such entities any and all information that may be required by those entities pertaining to me, my authorised driver(s) or the vehicle(s) declared in this proposal form or in the policy document which together constitute the contract".
A Data Protection Act to safeguard the personal data collected from local consumers is being drafted.
When that bill will be laid before Parliament is anyone's guess.
In the meantime, is it ethical for insurers to try to obtain permission from individuals to exchange or transfer sensitive data to other entities that have no legal obligation to protect it in a document that most persons do not read or understand?
Should the right to privacy that is protected under the Constitution be surrendered under a cloud of secrecy?
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org