Cedric Stephens | Fed up with broker

ADVISORY COLUMN: INSURANCE HELPLINE

QUESTION: I am getting very poor service from my insurance broker. He seldom returns my calls. On the occasions that he does, the responses always begin with apologies and talk about work pressures. These shortcomings tell only half of the tale. I have also started to question the quality of the advice he sometimes offers. What can I do to get better service? − T.M., Kingston 7

 

INSURANCE HELPLINE: You have not given enough information for me to properly answer your question. There are some basic things that I would like to know about your relationship with the broker. For example: When did it begin? Did it develop from a personal or business connection? Did you sign an agreement setting out your expectations as a customer? Did the contract describe the services that the broker would provide or, was it by ‘word-of-mouth’? Was there an exit clause?

Many broker-client relationships – particularly those involving private consumers – often begin on the wrong base. In the words of the song “Everything Crash” - “What gone bad a-morning, can’t come back good a-evening …”.

It is not uncommon for consumers to make decisions about which insurance broker or another service provider to use solely because he or she is a relative or friend or was recommended by one of the two. This is the extent of the homework or due diligence.

As the recent case showed, where a newly-recruited hotel employee was shot by a guest at the resort where he worked after he had sexually assaulted her, reliance merely on someone else’s advice – oral or written – can sometimes lead to bad results.

The banking and financial services industries include insurers and brokers. Some display behaviours that lead to the conclusion that making money is more important than providing service to customers.

For example, the head of Australia’s year-long Royal Commission into the misconduct in the Banking, Superannuation and Financial Services Industry recently put it this way: “In almost every case, the conduct in issue was driven not only by the relevant entity’s pursuit of profit but by individuals’ pursuit of gain, whether in the form of remuneration for the individual or profit for the individuals’ business. Providing service to customers was relegated to second place”.

Some of that country’s institutions were alleged to be involved in bribery, the use of forged documents, charging fees for services that were not provided and insurance mis-selling, according to The Guardian newspaper.

Are the local financial institutions immunised against these kinds of illnesses? Some insurance brokers are clueless.

Almost one year ago, I wrote that: “Even though the broker has a licence from the regulator which says it is a registered intermediary under the Insurance Act 2001, it is so in name only. Sadly, it doesn’t have a clue about the functions that professional insurance brokers should perform. Its primary purpose is to make money for its owners … through its selling activities”.

The focus is always on the next sale. Existing customers get second-class treatment. Here are few things that you can do to control the situation:

◆ Service expectations: Record in a few words in one of two columns the negative features of the services that the broker provides. Write the positive elements of the service that you would like to get in the second. Going through this process is important. At the end of it, you should have a good idea of the things that are important to you and those that are not.

◆ Decide whether to keep or change your existing broker or buy directly from an insurer: If you decide to keep your broker, use the information obtained from the ‘service expectations’ exercise above as a tool to negotiate future engagement terms. If you opt to find a new broker, the same information should help you in your search to find a new one. On the other hand, if you decide to buy directly from an insurer, bear in mind the risks of doing so.

Brokers, in law, are the agents of customers. “A broker acts as a professional adviser to insureds, or parties seeking insurance. They apply their experience and knowledge of the insurance market and insurance practice to assist clients to decide what risks to insure, and what insurance to purchase”.

Attorney-at-law Barry Nilsson also says “a broker owes clients a duty to apply reasonable skill, care, and judgement to a standard the average person of common prudence in the same position and profession can be reasonably expected to apply so as to avoid economic loss”.

When the broker makes a mistake or fails to carry out his client’s instructions, he can be sued for negligence. Consumers who buy insurance directly from an insurer assume the risks the broker would have carried. Insurers usually omit to point this out to persons who buy directly.

◆ Explore online options if you are only buying motor insurance: Emily Delbridge writes that buying insurance from a person is much like eating in a sit-down restaurant. By that logic, buying coverage on-line is like getting a fast-food meal: 24/7 availability, convenience and minimal waiting in line. On the other hand, using an online portal assumes a level of familiarity with computers and some basic insurance knowledge. This choice is clearly not for everyone.

◆ Claims expectations: Some buyers only think about a broker’s or insurer’s claims-handling process when they need it. This is a big mistake. The extent to which the parties are familiar with the process know their duties before something nasty happens can prevent surprises.

◆ Competence: Insurance, like most things, involve complexities. Make sure that the persons who provide service are suitably accredited.

 

- 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