Omar Anderson, Gleaner Writer
INSURANCE INDUSTRY officials are predicting that a proposal for insurance companies to make retroactive third party payments to clients will cause severe financial dislocations.
The Senate recently passed the Motor Vehicles Insurance (Third Party Risks) Act that will force insurance companies to pay clients the maximum payments under third party coverage.
DEBATE SUSPENDED
On Tuesday, a debate on the bill was suspended in the House of Representatives to allow the Government and Opposition to confer on whether to make the legislation retroactive.
But Andrea Gordon-Martin, general manager of United General Insurance (UGI) Company Limited, told The Gleaner yesterday that any such move would displace some insurers.
"It would certainly have an adverse impact on the industry," she suggested. "Retroactive legislation can be a dangerous thing."
According to her, insurance companies would be forced to reopen closed cases. Mrs. Gordon-Martin also noted that there's an usual "reserve" amount of funds for each open case.
NO RESERVE
The general manager noted that should a case be reopened, there would be no reserve.
"It (retroactive legislation) would open up a can of worms," Mrs. Gordon-Martin stated.
Cedric Stephens, an independent insurance consultant, said any retroactive legislation would deal a further blow to the insurance industry which he said cumulatively underwrote a $835.9 million loss last year, meaning the industry disbursed more than the premiums collected.
"A retroactive legislation is going to result in higher premiums," he stated. "The public is going to pay for it."
On Tuesday, Audley Shaw, Opposition spokesman on finance and the public service, piloted the Bill in the House of Representatives, after Opposition Senator Arthur Williams, an attorney-at-law, piloted and had it passed in the Senate on September 16. In 2002, the Court of Appeal dismissed a $550,000 award against Globe Insurance Company, which had disbursed a $200,000 minimum payment to a client who had paid premiums for the maximum $750,000 coverage. However, the Appeal Court stated that while it was abound to overturn the Supreme Court's award based on the current law, the minimum payment scheme was unjust. On Tuesday, Foreign Affairs Minister K.D. Knight, a lawyer, proposed that the amendment to the Bill be made retroactive.
However, Opposition Leader Bruce Golding said that while he welcomed the proposed changes to the Act, the Opposition was apprehensive about retroactive legislation, except in very extreme circumstances.
The matter returns to Parliament next Tuesday.
