Are insurance customers treated fairly?
Cedric Stephens Insurance HELPLINE
QUESTION: Are there any local or international best practices that speak to how insurance customers are to be treated, generally, and, specifically, how claims are to be dealt with?
- D.H.L., Kingston 7
INSURANCE HELPLINE: Broad-brush questions like yours consume less than 10 per cent of the word limit that the editor allocates to me each week. They give me more room to share information and to express my views, hopefully in ways that readers find interesting and that are consistent with this column's mission.
What are best practices? These four words produced 128 million results when I typed them in my search engine. Of the 10 definitions that I read, Techopedia's - techopedia.com - seemed the most suitable. It said: "A best practice is an industry-wide agreement that standardises the most efficient and effective way to accomplish a desired outcome. A best practice generally consists of a technique, method, or process. The concept implies that if an organisation follows best practices, a delivered outcome with minimal problems or complications will be ensured."
As far as I know, the local insurance industry has not developed any best practices of the kind that you have described.
The Financial Services Commission (FSC) regulates the industry. Its website, which was recently revamped, does not offer any general information in one place about how insurance consumers are to be treated by insurers or intermediaries.
The site devotes a very small part of its capacity to issues that are of interest to the average insurance purchaser. It is also consumer-unfriendly.
The publication that comes closest to discussing consumer-related issues is the 1,000-page book of rules, written largely in legalese, which comprises the Insurance Regulations.
LOCAL BEST PRACTICES
A document, Market Conduct Guidelines on Best Practice for Motor Insurance Claims, appears on the commission's website. My March 6, 2014 article, 'Motor Claims guidelines need a rewrite', argued that the guidelines' principle - "promoting the equitable settlement of cases" - was just words.
There were no specific rules in them explaining how this principle was to be applied in practice or how the commission, or consumers, would know when the standard was breached.
Nearly one year later, the regulator has not responded to those comments.
Jamaica is a member of the International Association of Insurance Supervisors (IAIS). It is represented by the FSC. According to the IAIS's website - ias.org - that body "represents insurance regulators and supervisors of more than 200 jurisdictions in nearly 140 countries, constituting 97% of the world's insurance premiums. Its objectives are to promote effective and globally consistent supervision of the insurance industry ... for the benefit and protection of policyholders; and to contribute to global financial stability."
IAIS describes itself as "the international standard-setting body responsible for developing principles, standards and other supporting material for the supervision of the insurance sector and assisting in their implementation."
INTERNATIONAL BEST PRACTICES
Supervisory bodies like the FSC are expected to adhere to insurance core principles, ICPs, in the discharge of their functions. ICP 19 - Conduct of Business, for example, imposes a duty on the supervisor - in Jamaica's case, the FSC - to "set requirements for the conduct of the business ... to ensure customers are treated fairly, both before a contract is entered into and through to the point at which all obligations under a contract have been satisfied."
Here are some specific excerpts from ICP 19.2 that apply to insurers and intermediaries with respect to the fair treatment of customers:
19.2.1: Supervisors should ensure that insurers and intermediaries have proper policies and procedures in place to achieve the fair treatment of customers and monitor that such policies and procedures are adhered to.
19.2.2: Proper policies and procedures dealing with the fair treatment of customers are likely to be particularly important with respect to retail customers because of the asymmetry of information that tends to exist between the insurer or intermediary and the individual retail customer.
19.2.3: Supervisory requirements with respect to fair treatment of customers may vary depending on the legal framework in place in a particular jurisdiction. While the desired outcome is fair treatment of customers, this may be achieved through a variety of approaches, with some jurisdictions favouring a principles-based set of requirements, some favouring a rules-based approach, and others following some combination of approaches, depending on the circumstances.
19.2.4: Fair treatment of customers encompasses achieving outcomes such as
developing and marketing products in a way that pays due regard to the interests of customers;
providing customers with clear information before, during, and after the point of sale;
reducing the risk of sales that are not appropriate to customers' needs;
ensuring that any advice given is of a high quality;
dealing with customer complaints and disputes in a fair manner;
protecting the privacy of information obtained from customers; and
managing the reasonable expectations of customers.
There are 10 specific principles that apply to claims in the IAIS Core Principles. They are, in my judgement, far superior to those in the FSC guidelines. They will be the subject of my next article.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: email@example.com.