Cedric Stephens | Dissecting bad claims practices

ADVISORY COLUMN: INSURANCE HELPLINE

“Many thanks for the information that you provide each week.”

Those were the words a female reader said to me last week during a brief encounter in the supermarket. I was meeting her for the first time. She knew my name and recognised me from the photo that accompanies my articles and, if truth be told, my wife hates.

If that was not enough, the Jamaica Stock Exchange hosted a two-day workshop on Disaster Risk Financing last week. The exchange asked me to make a 30-minute presentation. Their invite was based solely on my writings. When I sat down at lunch, many of the persons around the table seemed familiar with my column.

Risks and insurance are now part of national conversations.

The Finance Minister disclosed at the Jamaica Stock Exchange event that the World Bank and government were working to develop a catastrophe bond. A catastrophe bond, or CAT bond, is a high-yield debt instrument designed to raise money for companies in the insurance industry and even governments, in the event of a devastating natural disaster. It would help the government to respond more effectively to the economic dislocation caused by weather-related and other disasters.

The second example was the statement made by the newly rebranded Minister of Health and Wellness to Parliament, also last week, about a national health insurance plan. Its goals are to “increase overall resources for the health sector; increase efficiency in the use of available resources; promote sustainable health care financing; and improve the quality and coverage of health services.”

Down-to-earth matters will be the theme of today’s article – not the highfalutin stuff.

The aim is to discuss, from the point of view of the senior manager that handles claims for an insurance company, some of the problems that policyholders and claimants face in relation to motor claims and how they can be avoided.

The source is a trained attorney. She works with one of the country’s largest non-life insurers. The company pays thousands of claims each year. The issues are not listed in any particular order.

Problem: Information about the other person’s driver’s licence is not recorded and submitted

The absence of this data prevents the insurer from deciding on coverage status. Insurers are often reluctant to settle if there is insufficient evidence to confirm that the alleged driver satisfied the policy authorized driver requirements. To avoid this, claimants should capture the info at the accident scene just in case the other party does not report the accident.

Problem: Some drivers often deny involvement in accidents when they are at fault

This problem can be solved by the use of cameras – most people now have smartphones – to take photos of the vehicles at the accident scene, making sure that licence numbers are captured. Dash cams are even better because they record the accident and who caused it.

Filing a report to the police also helps provide written evidence of the event. It is unwise to make assumptions about the other person’s honesty in the absence of written evidence to the contrary.

Problem: Where more than one insurer is involved disputes about liability can occur and resolution of the disputes is sometimes very lengthy

Again, cameras/photographs/dashcams and statements from independent witnesses can play a big role in determining liability at an early stage. Evidence collected as soon as possible after the mishap can play a major role in fast-tracking settlement and avoiding litigation.

Problem: Customers often complain that they are penalized even though they were not the liable party

Typically, insurers adjust the no claims discount once payment is made under a comprehensive policy, if there is no recovery. Some insurers offer No Fault Discount, NFD, whereby if it can be satisfactorily established that an insured is not at fault for the accident, their discount will remain intact. Other companies call this accident forgiveness.

Problem: It is estimated that between one out of four motor vehicles operating on Jamaica’s roads is not insured

Uninsured motorists are a threat to insured motorists. Getting recovery from an uninsured motorist is very remote. Some consumers buy uninsured motorists’ coverage to protect themselves from this risk.

Problem: Little or no communication from insurers on the progress/status of claims

This a sore point for most customers. Claimants should assume responsibility for managing the settlement process instead of relying on the company to do so. Follow up, follow up and follow up.

Problem: All comprehensive policies are subject to an excess or deductible in the event of a claim for damage to the vehicle

The excess is intended to give the owner or driver a financial stake in each accident and therefore to drive with consideration for other motorists. A deductible or excess in comprehensive motor policies is like death or taxes. It can be recovered sometimes but is never avoided.

Problem: The average clause

The point made about the excess, see item 7, also applies to the average clause. Most customers will say that they were never told of the average clause in cases where their properties are assessed as being underinsured. This can develop into a highly contentious situation.

Problem: Customers often react negatively to deductions made from their claims for betterment

Nine out of every 10 claims made worldwide are settled on this basis.

I hope that this information meets the needs of readers like the one I met in the supermarket last week.

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