Insurance Helpline With Cedric Stephens
Question: I was involved in an accident on February 16 this year. It was reported to the police and my broker. A few weeks later, I learnt that the other party, who was at fault, had not made a report to his insurers. They wrote him and asked for a response in 12 days. I was advised to submit a police report. I sent the report to my brokers. After making numerous calls to the brokers, they told me on June 8 that the police report was sent by the third-party insurers to their client. He is expected to respond within 21 days. It has now become apparent that the other driver did not reply to the insurer's first letter. What will happen if he does not respond to the second? After the assessment of the repair estimate was done I paid to fix my bumper. Will that money be refunded? Where do I go from here?
HELPLINE: Insurers' failure to properly acknowledge, investigate, pay or deny claims within specified time frames was, according to blogger Marc Lanzkowsky, the leading cause of market conduct fines in the US between 2006 and 2010.
Market conduct fines are penalties that regulators impose on insurers who do not meet minimum service standards.
Local standards - or best practices - say how insurers should handle motor claims. However, they are very imprecise. Non-compliance does not lead to fines, even though the improper handling as in your case is often the exception rather than the rule.
Four months have passed since your car was damaged and the insurer of the third party appears to be in no rush to pay you. The long delay in finalising your claim is probably the result of the broker's incompetence and inefficiency and the absence of know-how on the part of the claims handler in the insurance company.
Some brokers focus most of their energies on making the sale and collecting the premium.
After-sales service - especially the provision of claims advisory, handling and negotiation - is often substandard or non-existent. Many of the persons working in this area with brokers and insurance companies are often clueless about the conditions found in motor insurance contracts and know very little about the life cycle of claims.
Insurers completely control the claims process. Condition number 2 - Conduct of Third Party Claims - of the contract that insures my car says "no admission, offer, promise or payment shall be made by or on behalf of the policyholder without our written consent and we shall be entitled, if we so desire, to take over and conduct in your name the defence or settlement of any claim we shall have full discretion in the conduct of any proceeding and in the settlement of any claim".
The insured's duty - in your case, the third party - in the process is largely to furnish information. Decision-making about liability or payment is the insurer's sole responsibility.
In 'Ignorance and the injustice of unreported accidents' published in this newspaper on June 3, I wrote: "Parliament passed an amendment 23 years ago to the law that governs motor vehicle insurance. It closed a loophole that allowed insurers to avoid paying claims where the owner or driver of an insured vehicle that caused an accident failed - deliberately or otherwise - to file a report with his insurers as required under the terms of his policy. That change was also done to prevent dishonest persons ... from avoiding responsibility for their actions. It was also done to ensure that the owner (or driver) of an insured vehicle would bear the financial burden of an accident in the form of higher premiums instead of those costs been passed on to the accident victims."
The amendment was Section 8(1) of The Motor Vehicles Insurance (Third-Party Risks) Act.
The provisions numbered 132 to 139 of the Insurance Regulations - which were enacted under the Insurance Act, 2001 - deal specifically with the subject of claims.
Unfortunately, they are not very helpful. This is because the persons who wrote the regulations made the assumption that all types of claims were similar. In other words, motor claims for property damage were similar to motor claims for personal injuries and were similar to claims made under health or life or fire or other types of policies.
Other than the general requirement that "payment of claims shall be made with unavoidable delay" and Subsections (2) and (3) of clause 135, most of the clauses are as clear as mud to me!
The cards are stacked in your favour. There are no good reasons why your claim should not be paid.
Use the information in this article to harass your broker and the insurers of the third party to pay you pronto. Tell them about Subsection (3) which says: "When the payment of claim is delayed more than two months, the insurer shall pay interest on the cash sum due."
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. firstname.lastname@example.org SMS/text message to 812-7233