INSURANCE HELPLINE | Dear insurance broker, you’re fired!
QUESTION: I did a Donald Trump on my insurance brokers. I fired them last week. After being with them for 12 months, I discovered that I was driving my vehicle for over one month without any insurance. The company did not even send me a notice to say that my policy was due for renewal. In this day and age, they could have telephoned, sent a text message, or emailed me. What would have happened if the police had stopped me for a routine check or I was involved in accident where I was at fault?
- P.D.S, Kingston 6
INSURANCE HELPLINE: Deposit-taking financial institutions in Jamaica do not appear to have been very successful at running insurance broking companies. Taking deposits and making loans are easier. This conclusion is based on the experiences of two of the island's biggest banks, plus what has happened to you.
In the case of one of the banks, it entered the market with a great deal of hype - a feature of the then CEO who was well known for his bombast and can-do attitude. A few years later, the bank quietly sold the broker's book of business and pulled down the shutters.
The broker's results were said to have been "below expectations", which was another way of blaming the broker's management. Nothing was said to explain why the broker's business strategies and mission, which were presumably formulated with the bank's approval, were completely out of sync and why unrealistic profit expectations were agreed.
In the case of the other big financial institution, all that can be said at this stage is that its insurance broking subsidiary was still registered to conduct business at June 30. The person who headed the broking company is now out of a job.
Your recent experiences with your now ex-broker suggest that it and its financial institution parent are finding it very difficult to operate in an over-crowded market and in an economy that is not growing. Data from the Financial Services Commission indicate that there were 24 licensed agents and 26 insurance brokers in Jamaica as at June 30. Yours is one of two very serious complaints that I have received about this particular broking company. All cannot be well with the company if it does not have the right people and the essential tools - among them a technology platform in place to properly discharge its functions.
Ian Youngman, writing a paper for the Chartered Insurance Institute entitled "The Business of Insurance Broking", says the aim of a broker is to work in the best interests of customers, so they will:
n Ask the customer about his/her insurance needs so they [the broker] can search for a suitable policy;
n Make choices clear by advising on the range of products that are available;
n Explain any professional advice given - clearly and honestly;
n Make sure the customer understands what is, and is not, covered by any policy;
n Clearly state the costs - including any fees they may charge;
n Give clear information and documents - as well as any help with the paperwork - to make sure any policy is in place promptly;
n Explain their support in the event of a claim;
n Explain the right to complain if dissatisfied with any policy; and
n Explain the right to cancel on any policy.
Youngman lists nine functions that are undertaken by client-facing employees - known as account handlers or account executives - in broking companies. Two of these are "foreseeing clients' insurance needs, such as policy renewals"; and "renewing or amending existing policies."
Put more simply, managing the renewal process of clients is an important part of the functions that brokers should routinely perform.
Technology is one of the things that influence the success of companies in and outside of the insurance industry. Well-run brokers and insurance companies know at least three months in advance which policies are due for renewal. They start a process to make contact with customers as the first in a series of steps to ensure that there is no break in the protection that was bought at the start of the contract.
Failure to start the process, for whatever reason, is evidence of a serious breakdown of the company's systems and/or inadequate investment in technology. These types of problems can result in claims against the broker for professional negligence.
Firing the broker was the right thing to do. Happily, you did not suffer any financial losses as a result of your ex-broker's failure to discharge its professional duty.
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