Cedric Stephens, Contributor
QUESTION: I try to follow your column weekly, but must admit that after doing so, I tend to end up with a bad feeling. It is caused by the unjust manner in which some insurers handle people who are forced to insure motor vehicles with them. I know about many instances of injustice. The problem is, when insurers eventually admit their fault, the claimant often has to 'hug up' the costs. There is no recourse for time wasted, and so on, while the insurer was pursuing its 'investigation'. Do not get me wrong: there are some very nasty folks out there who try to cheat insurers. However, insurers should not treat all claimants as being dishonest. Perhaps Jamaica needs to follow the example of the United Kingdom (UK) and appoint an Insurance Ombudsman to look into differences between insurers and the buyers of insurance. What do you think?
- Insurance Professional, Kingston 5.
HELPLINE: I am always glad when persons in the insurance industry like you (or the founder of The Insurance Company of the West Indies last week) write to express their opinions.
I selected your email for today's column for several reasons.
First, it follows the thread that began on August 25 where insurance fraud was being alleged. Also, your comments give me the chance to let readers know what other countries are doing to even the scales between insurers and buyers of insurance - especially the ordinary folks like you and me.
Third, you have allowed me to make an important link between last week's article, "Do not back down! Fight back!", and something that I learnt last Wednesday.
PUNITIVE AND AGGRAVATED DAMAGES
Five months ago, a Canadian Court ordered two insurers to pay US$4.9 million in punitive and aggravated damages. This was for denying and delaying payments to a Canadian citizen who was hurt working at a mine in Kyrgyzstan.
The court said, "It knew that a US$3 million decision would not be particularly significant to the company's bottom line but it was meant to grab the attention of the insurance industry," according to Best's News Service. "The industry must recognise the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to individuals (sic) insured."
As you put it so well, most aggrieved persons here have to 'hug up' the costs.
Natalie Ceeney, CEO of the UK's Financial Ombudsman Service, said in an article in June/July issue of The Chartered Insurance Institute Journal: "We do think insurers have got tougher on claims in the past two years. Claims are being turned down that perhaps, in recent history might not have been." She was speaking against the background of that economy which is slowly climbing out of recession.
The Jamaican economy is still in recession. Insurers have taken a double hit on the Jamaica Debt Exchange (JDX) and the National Debt Exchange (NDX).
What is happening in Jamaica now is probably even worse than what is occurring in the UK. Insurers are aggressively taking steps to reduce the amounts that are paid for claims or trying to avoid claims, though few of them would say so.
Industry statistics show that while gross premiums rose by three per cent between 2011 and 2012, claims grew by 11.2 per cent. During the 10-year period before that, motor insurers amassed a loss of J$6.6 billion, part of which was due to fraud on the part of some claimants.
T&T HAS AN OMBUDSMAN
The Trinidad & Tobago government set up an Office of The Financial Services Ombudsman (OFSO) in 2009. That agency is intended to "curb anti-consumer practices and help heighten and retain consumer confidence in the delivery of services in T&T's financial sector (banks and insurance companies)."
OFSO has the authority to make an award where an agreement cannot be reached between the parties for "an amount not greater than TT$500,000 or greater than the amount to compensate for direct loss or damage suffered by the complainant by reason of acts or omissions (on the part) of the institution."
Public trust and confidence are critical to the development of the insurance industry.
On April 6 of this year, the Consumer Insurance (Disclosure and Representation Act) 2012 went into force in the UK. As the title of the law suggests, it relates to insurance consumers, not businesses. It adjusts the obligations of the insured in relation to disclosure and adjusts the available remedies - something Mr Lalor omitted to mention last week.
To quote a UK lawyer: "Although insurance contracts will remain contracts of utmost good faith, the balance of risk in both areas would shift in favour of the insured."
Steps are now under way to achieve similar goals in relation to businesses that buy insurance. UK law is changing. However, it does not apply in Jamaica. Until lawmakers decide otherwise, insurers here will continue to rule the roost!
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance.Email him at email@example.com or SMS/text message to 812-7233.