Insurance consumers need a champion
Published:Sunday | May 26, 2013 | 12:00 AM
Insurance Helpline With Cedric Stephens
I read your column in last Sunday's Gleaner and decided to write you about my case. June 14, 2013 will be exactly one year since my car was in an accident on Old Hope Road. A bus moved over from the left lane in order to avoid hitting a taxi, and hit the side of my car instead. I followed the bus to Papine. The driver admitted liability and a report was made to the Papine Police at about 4 p.m. All the required forms, photographs, etc, were handed over to my insurance brokers. Month after month they have been consistently following up the matter on my behalf. In spite of those efforts, there has been no settlement. It is now time to pay my annual premium. I really do need the funds which were used to repair the car and get it back on the road. Is there any authority to whom I can appeal?
HELPLINE: The short answer to your question is that, as far as I know, there is no authority to whom you can appeal that will twist the third party's insurer's arm to pay your claim. This, unfortunately, is sad but true, and was one of the main points behind last Sunday's column: "A letter to the new FSC head".
The recently-appointed executive director of the Financial Services Commission, Janice P. Holness sent me an email on Monday, May 20, which she described as "a quick acknowledgement" of the column.
She also wrote: "As a general premise, I do share your belief regarding the role of the regulator beyond prudential issues. In fact, with a background in enforcement in the area of financial services regulation, I hold the view that conduct is a critical prong in any regulatory framework." She promised "to respond fully" to the column.
What is prudential regulation? How does it differ from market conduct regulation? The Law Faculty of the University of New South Wales in Australia, says: "The former concentrates on standards, guidelines and recommendations of best practice on capital adequacy, liquidity and solvency risk and procedures for the orderly winding down of regulated financial institutions. Market conduct regulation, on the other hand, refers to the operation of the market ..."; and - to quote one of the points made in last week's column - its "impacts on the market and on consumers".
prudential functions
One of my criticisms about the FSC over the years is that it has tended to focus on carrying out its prudential functions to the detriment of its market conduct function. One of the results of this is that consumers like you often end up losing money without an authority to whom they can appeal.
One of the things that has always puzzled me is how some consumers are keen to buy the latest model motor vehicles, smartphones, tablets and other types of portable computer devices, gadgets and other toys, all with relatively short shelf lives - there is even talk about the delivery of banking services using mobile phones - and continue to accept a claims system/service from enterprises in the private sector that has seen no significant improvements in the last 40- 50 years?
The solution to the problem is not solely with the regulators but, procedures and rules can help. California's Fair Claims Settlement Practices Regulations - http://www.insurance.ca.gov/0100-consumers/fair-claims.cfm#settlements — provide a good example. According to the preamble, Section 2695.1, the goals of the regulation are to:
1. Delineate certain minimum standards for the settlement of claims which, when violated knowingly on a single occasion or performed with such frequency as to indicate a general business practice shall constitute an unfair claims settlement practice;
2. Promote the good faith, prompt, efficient and equitable settlement of claims on a cost effective basis;
3. Discourage and monitor the presentation to insurers of false or fraudulent claims; and,
4. Encourage the prompt and thorough investigation of suspected fraudulent claims and ensure the prompt and comprehensive reporting of suspected fraudulent claims.
Do local motorists who pay billions of dollars in premiums to insurers each year deserve any less than the consumers in California? The solution to the problem that you and other consumers face is squarely in the hands of insurance industry leaders and the regulator.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Send feedback to aegis@flowja.com or SMS/text message to 812-7233