Cedric E. Stephens, Contributor
Question: Three female relatives and I were travelling in a car to attend a wedding on the north coast. I had an accident on the highway at about 7:30 a.m. while going through Hanover. The car hit something and ran off the road. When I reported the accident to my insurers, they said the claim process would take six to eight weeks. Two weeks later, I met with an investigator. I was told that I would hear from the insurers in two weeks. After a month had passed I called the insurers. They said that I would hear from them in two days. Two days later, a man called saying he was from the insurer. He said that he wanted to meet me. I discovered that he was another investigator. When we met, he asked where the vehicle was bought, who planned the trip, selected the route and chose the time to travel. After 16 weeks, the company made an offer of settlement. They refused to pay any portion of the storage fee even though the processing time for the claim exceeded their estimate. The vehicle was stored at a repair shop where it was usually serviced. They also decreased the sum insured by $1.16 million even though a valuation was done months before the accident. Depreciation was the first reason that they gave for the reduction. When I questioned this, they said that the sum insured for the vehicle was too high. Is it right for the company to drag out the claims process and then refuse to pay even a portion of the storage fee? Do insurers have the right to insure a vehicle for an amount chosen by their valuator and to pay out pay out less at the time of a claim?
Helpline: Even though the subject of last week's article -Unpaid mature policy highlights gap in regulatory system was about life insurance, there are links between your questions and those that email@example.com. asked. How insurance is conducted and fairness are at the root of both sets of questions. The newly appointed deputy director of our non-bank regulator, the Financial Services Commission (FSC) , clarified certain parts of the comments that I made last week about market conduct and prudential regulation.
He wrote: "Although we place greater emphasis on prudential regulation, the legislation (The Insurance Act, 2001) does contain market conduct provisions to do with the settlement of benefits and claims. It also deals with information to the policyholders and the issue of misleading representation by the companies. It does not give us the authority to instruct the companies on pricing or the selection of risks." My friend is absolutely correct. Section 120 (1) of the act - which deals with the much-hated average clause - is a good example of a market conduct issue.
About two years ago, the FSC released a document, IR-GUID-09/08 0014, 'Market Conduct Guidelines on Best Practice for Motor Insurance Claims'. The guidelines represent the minimum standards for the settlement of these types of claims. Rules (or regulations) numbered 132-139, which were enacted under The Insurance Act, also provide a framework for the settlement of claims. The actions of your insurers (and their agents, the investigators) should therefore be examined in the context of your insurance contract, the regulations and the motor-claim guidelines.
The guidelines require that insurers:
1. Respond promptly to reasonable requests by claimants upon submission of claims.
2. Provide reasonable guidance to facilitate a claim on a contract of insurance. This will require the insurer to provide an explanation of how the insurer will handle the particular claim and advise the claimant of what is required of them at an early stage in the process.
3. Claims procedures documents are readily available to claimants.
4. Keep the claimants informed as to the progress of the claim, including the internal and external procedures to resolve disputes.
5. Settle claims promptly, once liability has been established.
More specifically, the guidelines compel insurers upon receipt of the insured's claim to:
a. "Establish a claims log to record the activities undertaken pursuant to the claims process;
b. "Respond in writing or by telephone within five working days;
c. "Advise with an explanation whether the claim is covered by the insured's policy; and
d. "Provide the claimant with an explanation of the claims process, including the required documentation and reports."
I will leave you to pass judgement on whether or not your insurers have complied with the minimum guidelines and best practices of the regulator.
Clause no. 135 of the Insurance Regulations is also relevant. Sub-clause (1) reads: "Payment of claims shall be made with unavoidable delay if (a) the insured event has been proved, (b) liability under the policy has been agreed, (c) the amount payable by the insured agreed, and (d) entitlement of the insured to receive payment has been established." Subclause (2) continues: "All moneys payable under the contract, other than benefits for loss of time, shall be paid by the insurer within 30 days after it has received proof of the claim." Subclause (3) imposes a penalty when insurers are tardy in settling claims. It says: "When the payment of a claim is delayed more than two months, the insurer shall pay interest on the cash sum due."
Read your policy and then try to negotiate a fairer settlement with your insurer using the information that I have provided. If you succeed in getting a better offer, drink a toast to the folks at the FSC; they drafted the claims guidelines and regulations. Finally, my suspicions are that two investigators were assigned to handle your claim because of when and where the accident occurred and the fact that another vehicle was not involved.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. Email: firstname.lastname@example.org; SMS/text message at 812-7233.