Cedric Stephens | Unfairness in insurance contracts
QUESTION: Thank you for your invaluable service and the body of knowledge that you share each week. An insured submitted the required documents to the insurer within 7-14 days after an accident. The company took a further 33 days to investigate and offer a settlement. The cost of the wreck (or salvage) and the excess (or deductible) were subtracted from the offer. The cost of vehicle storage for 50 days at the repairer was part of the claim. The company refused to pay that charge. It said that while the "policy allows a claim for reimbursement of any wrecker fee/expense incurred for the removal of your motor vehicle after an accident, the cost of storage is not a covered expense". What are your thoughts?
INSURANCE HELPLINE: The average response to your question from persons who work in the insurance industry from their offices on Duke Street, in New Kingston and its environs, Portmore, in the major towns of Ocho Rios, Mandeville, Montego Bay, and other locations and even those who work indirectly in it, like The Financial Services Commission's officers and employees, would be much the same.
Their reactions, I believe, would be like this: The policy clearly states that costs associated with the storage of a vehicle after an accident are not recoverable. Its meaning is clear. Why the fuss? The insurer is not bound to pay these expenses under the contract. Period.
I realised that an average response would not be sufficient as I sat down to reply your question. One had to look more deeply into the matter. The typical answer would not address the profound issue of unfairness in insurance contracts generally and that was implicit in the specific matter you wrote about.
The catalyst for this line of thought was two articles published in this newspaper on consecutive days last week. The first was 'Pay up now: Time to confront Britain on reparation'. Reparation which, by the way, means the same as compensation, a term that is commonly found in most insurance contracts is founded on a simple argument. Slave owners were compensated by the British government for the loss of income suffered because of the ending of the slavery. Slaves, on the other hand, who laboured without pay under inhumane conditions, got nothing except their freedom.
The second leg of the argument is that the descendants of slaves should also get compensation today for the enslavement of their ancestors.
The headline of the second article was 'I had to seek greener pastures'. It reverberated much louder. The story was about the experiences of a Windrush passenger and returning resident, Stanley Roy Archer. He was a former resident of St Mary who migrated to Britain in the 1950s. He was the holder of a United Kingdom passport and an ex-soldier in the British Army. Racism was a part of his daily life.
Many of the laws, rules, traditions and practices on which the insurance industry in Jamaica and other parts of the English-speaking Caribbean are built had their origin in the UK. Some of the foundational principles of insurance, like utmost good faith and indemnity, existed when slavery was in its heyday.
TREATING CONSUMERS FAIRLY
Insurers in the UK provided coverage to protect the interests of slave owners and ship owners while the slaves were being transported from Africa to the West Indies like cargo. Are these matters relevant today in Jamaica when we seek to apply old-time insurance principles like indemnity, or is it time "to move on", as one UK ex-prime minister said?
Has the UK parliament updated its legislation and rules in the practice of insurance and how consumers are to be treated to reflect 21st-century ideas of fairness while we remain stuck with applying ideas associated with the colonial period?
Treating consumers fairly, or TCF, is now one of the general principles on which the UK insurance industry operates. TCF should be at "the heart of their business model", according to their regulator, the Financial Conduct Authority. Further, there are six consumer outcomes that firms should strive to achieve to ensure fair treatment of customers:
1. Consumers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture.
2. Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.
3. Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
4. Where consumers receive advice, the advice is suitable and takes account of their circumstances.
5. Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
6. Consumers do not face unreasonable post-sale barriers imposed by firms to change the product, switch provider, submit a claim or make a complaint.
Taking nearly five weeks to investigate and make an offer to settle a motor claim is way too long. If TCF was at the heart of your insurer's business model, they should have offered to pay at least part of the storage fee. They had control of the claims process. To expect you to incur storage costs without an obligation on their part to settle the claim promptly would be unfair.
- 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