ADVISORY COLUMN: RISK & INSURANCE
Alert readers will have noticed that this column has been rebranded. Insurance Helpline – the name since July 1997 – no longer reflects the range of topics that it discusses.
Personal hygiene, the wearing of masks in public and social distancing, among other measures designed to contain the spread of the novel coronavirus, are examples of how this pandemic risk is being managed at the personal, organisational, and societal levels.
There are other types of risks, with different strategies for managing them. Insurance is one of many. It was invented centuries ago to help merchants reduce some of the risks associated with maritime trade.
The rebranding to Risk & Insurance is not dissimilar to what happened in the former Ministry of Health a few months ago. It is now known as the Ministry of Health & Wellness. Health and wellness are linked. They are two peas in a pod.
Member of Parliament for South St Catherine Fitz A. Jackson is trying to connect the pandemic risk to the local insurance industry. He, like other politicians in the United Kingdom and United States, and some business operators, is challenging the orthodox view that insurers are not responsible to pay for some of the economic disruption caused by COVID-19.
Today’s article will feature the edited comments of one reader – call him Whistle-blower − in relation to motor insurance claims settlement practices that he witnessed. His comments were made against the background of the article that I wrote two Sundays ago, ‘Claims delay blame game’.
The quick settlement of legitimate claims is one of the ways that insurance helps claimants to reduce financial losses when risk events occur. The writer is a former claims manager.
● Third parties cannot claim directly against a negligent driver’s insurer. Their own insurer must send a letter of claim to the other insurer to begin the process. Depending on the circumstances, some of these letters incur the payment of a fee.
Non-payment of the fee and/or premium can delay the preparation of the letter. This was particularly so in the case of one insurer. Its practices were out of sync with the former Road Traffic Act.
Columnist’s comment: The insurance regulator’s 2019 revised market-conduct guidelines do not explicitly impose a duty on insurance companies and intermediaries to treat third parties fairly or help them with the settlement of their claims.
● A police report is often required in cases where liability was dubious. Even then, such a report was often unhelpful, and the insurers had to do their own investigations to decide and assign liability. There were incidents where the police reports tried to do so but, of course, this would often be useless.
Courts typically assign blame on evidence, not opinion. Police reports are only prepared when a fee is paid. An interested party may have to wait six weeks for it to be prepared. A report is only necessary where liability was unclear. I cannot recall one being demanded for a property damage claim, where the other party accepted responsibility for the collision.
Comment: Whistle-blower is apparently implying that the lack of transparency in the claims process puts a first-time third-party claimant at a serious disadvantage when he/she is negotiating the settlement of his/her claim. He suggests that the third-party claimant in my ‘Claims delay blame game’ article was not treated in a manner that was consistent with the spirit and intent of the FSC’s market conduct rules.
● Property damage claims for vehicles are generally settled quickly, all other things being equal.
Comment: It is significant that the former claims manager did not offer any metrics to indicate what he meant by quickly. Similarly, nothing in the regulator’s rules imposes a time limit in which claims should be settled. The local approach should be contrasted with a recent ruling by the Malaysian regulator that ‘the average time’ for the settlement of motor claims in that country should be reduced to below 60 days.
● The market devised ‘arbitrary and unorthodox’ rules for the settlement of some claims.
Example 1: A vehicle is turning right, and the driver has centred the road and engaged his right indicator. For some reason, a vehicle behind decides to overtake on the right instead of passing on the left. That action causes a collision. The market assigns blame 50/50 without conducting investigations instead of finding that the driver of the overtaking vehicle was solely responsible.
Example 2: An accident occurs at a traffic light-controlled intersection. Both drivers allege that the other went through the red light. These claims are resolved 50/50 without any investigations being conducted.
● Third-party insurers tend to do everything to 'draw out' or extend a claim. There were exceptions, of course, but as a rule, some insurers appear to be in no hurry to settle a claim from someone they do not insure or know.
Whistle-blower, a former industry insider with impeccable credentials, has raised serious questions about how motor claims are handled by this segment of the insurance industry and about competence and supervision of claims staff.
The allegations, if true, suggest that claims operations, specifically, are not being conducted in a manner that is consistent with the letter and spirit of the FSC’s 2019 Revised Market Conduct Rules.
When these charges are examined in the context of my experiences with the industry’s health-insurance segment, which were the subject of last week’s article. ‘Close Encounters of the First Kind’, a written response from the Insurance Association of Jamaica as well as a regulatory review of claims practices are obligatory.
The promotion of stability and public confidence in the operations of these financial institutions can only be assured by the adoption and maintenance of international standards of competence, efficiency, and competitiveness,” to quote the FSC’s guidelines.
They also say that those rules are “in keeping with national initiatives to promote greater financial inclusion and to ensure that insurance services are delivered in a responsible and sustainable way".
Finally, Whistle-blower offered his comments to me in an email dated April 22. They were in response to my April 19 article. My second piece was written on April 23. I wrote it against the background of my experiences, which began on April 20. Attentive readers will notice one thread in all of them: COVID-19, risks and insurance.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com
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