Cedric Stephens | Systemic disorder in motor insurance claims

The Tell Claudienne column of the January 3, 2021, Sunday Observer inspired today’s article. Her mission is to solve consumers’ problems with a store, utility, or company.

Three insurance-sector companies, a broker and two insurers, that are regulated by the Financial Services Commission, FSC, were named in the article. Its headline, ‘Motor Vehicle Insurance Claim Headache’, in my opinion, could perhaps be said to have unknowingly downplayed the consumer’s insurance problem. It began on October 23, 2019, and was not resolved until after that newspaper’s intervention, nearly 15 months later. No apologies or explanations were offered for the delay as if this was the norm.

There are thousands of other unresolved claims in the insurance system that are like TT’s. I should know. I have been studying and writing about this subject for over 20 years. Before that, I spent decades working in the insurance industry.

Since the year started, three persons have contacted me about motor accidents that occurred as long ago as November 2018. None has been settled. They are the subject of investigations by the negligent drivers’ insurers. In all cases, the negligent drivers rear-ended other vehicles, or there was no dispute about who was at fault. These cases, I believe, are representative of a bigger problem. There is a huge backlog of cases, which is growing bigger every day, which the industry and the regulator continue to ignore.

Headaches may occur suddenly or may be chronic in nature. They fall in three groups: primary, secondary, and others. This is according to the International Headache Society, or IHS. Because so many people suffer from headaches, and because treatment is difficult sometimes, IHS “hoped that the classification system will help healthcare professionals make a more specific diagnosis as to the type of headache a patient has and allow better and more effective options for treatment”.

Unfortunately, there is no IHS equivalent in the insurance industry even though there are many kinds of motor insurance claims. Some are simple, others are complex, and there are the in-betweens. Because the claims-settlement process lacks transparency, is sometimes complex, and can be plagued with legal arguments, unexpected problems and delays, outsiders are often left in the dark. Further, insurance companies are not noted for their communication skills.

Claudienne should be applauded for bringing TT’s motor insurance ‘claim headache’ to public attention and helping to resolve it. She has, however, not diagnosed the root causes of the 15-month delay. If she has accurately quoted the insurer’s general manager, she could be accused of helping to spread false information about motor insurance and/or not fact-checking her source. The insurance company has behaved as though Section 8 of the Motor Vehicles Insurance (Third-Party Risks) Act, or MVITPRA, and the FSC’s February 2019 Revised Market Conduct Guidelines for Insurance Companies and Intermediaries do not exist.

She quoted the insurer’s general manager’s November 27, 2020, email as saying: “We are able to obtain a report from our insured and he accepted responsibility. We will communicate with TT’s insurers and brokers with a view to concluding the matter.” The first statement suggests that the company’s agreement to pay TT’s claim was dependent on the receipt of a report from the insured and his acceptance of responsibility for the accident.

Both parts of the first statement are irrelevant. Section 8(1) of MVITPRA prevents insurers from using the excuse that a report from the other driver is required before the company enters into negotiation for the settlement of the third party’s claim.

It says “any condition in a policy … providing that no liability shall arise under the policy … or that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the event giving rise to a claim under the policy … shall be of no effect”. The intent is crystal clear and unambiguous. I have been writing on this subject for nearly 20 years and have never been told that my interpretation was incorrect. I challenge the GM of the insurer to explain in writing why my interpretation of Section 8 is wrong.

The second reason can be found in the company’s motor policy. Even though I did not examine the insurer’s contract, I have a good idea how it is worded. I have assumed that it is not different from its competitors’. The conduct of third-party claims condition typically has the following parts:

• The policyholder shall make no admission, offer, promise, or payment without the insurer’s written consent;

• The insurer has the right to conduct, settle, or defend claims on the policyholder’s behalf;

• The insurer has full discretion and authority to settle claims.

The suggestion that the settlement of TT’s claim was conditional on the policyholder’s ‘acceptance of responsibility’ is therefore false. What would have been the situation if he had died in the collision?

There are probably other factors that are at work that are way above my pay grade. Also, there is sufficient information in this and the Sunday Observer article that could form the grounds for an enquiry by the insurance regulator, not the least of which is the breaching of the FSC’s Market Conduct Guidelines. This column would obviously welcome an intervention by the folks on Barbados Avenue into what appears to be a disorder of the motor insurance claims system.

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.