Cedric Stephens | Young drivers and motor insurance

QUESTION: What does open driving mean in the context of motor insurance? Am I not allowed, as a responsible parent, to give permission to my 18-year-old daughter − a student who just got her driving licence − the keys to operate my vehicle?

– N.B., Kingston 8.

INSURANCE HELPLINE: Today I had a eureka moment. I typed ‘FSC market conduct guidelines’ using the global search command in Windows 10. Within seconds, I made a wonderful discovery. Instead of finding a specific PDF file with that label, as I had expected, the operating system conducted a web search and listed 10 items on that subject. They included procedures relating to the insurance industry of several countries, including Jamaica.

Among them was a rather odd letter to the editor dated February 12, 2015 – which I had forgotten – authored by a former local FSC head, Janice P. Holness, plus an article that I wrote on September 9, 2018 titled ‘Finally, Insurance Reform with Upsides for Insurance Consumers’.

As I used Explorer to find the file I wanted – the February 2019 Revised Guidelines for insurance companies and intermediaries, I wondered why local private and public sector entities − like the Jamaica Information Service, and even FSC’s outreach division − have ignored the significance of the regulator’s efforts to level the insurance playing field that has been tilted for far too long too much in the favour of the providers.

Your two questions have provided me with the context to expose the utility of the market rules six months after their launching and raise awareness about how insurers and brokers should be operating. The guidelines, from my very limited experience, do not appear to have had any material impact on service delivery by insurers or brokers.

Market Conduct, according to the FSC rules, “refers to all strategies, policies, activities, systems, practices and measures that are executed or performed by insurance companies and intermediaries in the ordinary course of business, prior to parties entering a contractual arrangement and until all obligations under the contract have been satisfied.

It appears safe to conclude that your service provider did not explain the scope and limitations of your motor policy and, specifically, the term ‘authorised driver’. Alternatively, if they did, you forgot.

Motor policies do not contain the phrase ‘open driving’. A typical contract or certificate of insurance would say persons or classes of persons entitled to drive. My certificate under that heading lists: a) the policyholder; and b) any other person who is driving on the policyholder’s order or with his/her permission.

The policyholder does not have the authority to give blanket permission to all and sundry. There are important limitations. My certificate, for example, reads “provided that the person driving is permitted in accordance with the licensing or other laws or regulations … or has been so permitted and is not disqualified by order of a Court of Law or by reason of any enactment or regulation in that behalf from driving the motor vehicle”.

Some policies have specific restrictions on certain classes of drivers. For example, the specimen policy that I am looking at as a source of reference for this article contains the following exclusions in the fine print:

It is agreed that the company shall not indemnify you or the driver in respect of any loss or damage whilst your vehicle is being driven:

1. by or for the purpose of being driven is in the charge of any person under 23 years of age;

2. by or for the purpose of being driven is in the charge of any person who has had a driver’s licence for less than two years.

When these statements are read in conjunction with the preceding comments, the intention of the insurer becomes very clear. Even though you are a responsible parent, your contract of motor insurance, assuming that its wordings bear any resemblance to the one that I have cited, does not automatically grant you any permission to authorise your 18-year-old daughter to drive your vehicle if you want to be afforded the protection that your policy promises.

These restrictions were put in place to influence your behaviour even though they have not expressly said so. The insurance company is implicitly inviting you to contact them and tell them that your daughter has obtained her licence and that you want their permission to extend your coverage to include her.

Before they do so, they will ask you to pay an additional premium. Why? They will justify the extra charge by saying something like they didn’t take the likelihood of an 18-year-old driver into account when your premium was calculated. An 18-year old driver is an extra risk factor.

Insurers are collecting lots of information about their policyholders. However, unlike their colleagues in other fields, like my neighbourhood pharmacy, retail behemoth Amazon, global tech companies Google and Microsoft, local insurers appear to have limited their use of data to conducting transactions instead of developing relationships as the FSC market conduct rules demand.

- 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