Cedric Stephens | Opaque insurance jargon a disservice to consumers

A consumer who waited over two years to resolve her motor insurance claim against a third-party driver’s insurer was sent a 116-word email on March 2 by her insurer as the claim neared settlement.

The email read: “Please be advised that based on the revised estimate of repairs, we, General Insurer ABC, will be responsible for a portion of the claim due to an inter-company agreement with XYZ General Insurance. Please be advised that once there is a claim from your own policy, the policy excess (the portion of the claim that you are responsible for) has to be deducted. The excess is 5% of the value of your vehicle. As you are not the liable party, we can approach XYZ General to pay your policy excess and loss of use then proceed to settle our portion of the claim. Please advise us if you wish to claim or recover the excess and loss of use first.”

Did the claimant understand the message? Could the ideas have been expressed more clearly to the recipient and foster better understanding without lengthening the settlement process? Could the unspoken questions have been anticipated and their answers supplied in the first message?

Insurers and intermediaries are required under paragraph 3.17 of the FSC Market Conduct Guidelines to “communicate relevant and meaningful information to policyholders in a timely and comprehensive manner”.

Why is it that two years after the guidelines were unveiled no serious attempts appear to have been made to comply with them? Some “struggling” citizens, according to this newspaper, have complained about “unfair enforcement” of the Disaster Risk Management Act. In the meantime, insurance entities with multimillion-dollar assets, consistently ignore important societal rules set by regulators about how they should conduct business, without facing any sanctions. Where is the equity?

The Financial Services Commission committed a strategic blunder when it introduced the guidelines in February 2019. Insurance buyers, who ultimately fund the FSC’s operations by way of their premiums, were uninvited guests. Unlike the Office of Utilities Regulation – whose motto is, appropriately, ‘OUR working for you’ – the FSC did not use the public media to tell consumers how insurers should operate in their daily public-facing interactions.

On the other hand, recent OUR print advertisements advise consumers how phone companies “must now be clearer about their contract terms and policies” and how customer complaints must be handled. The insurance regulator, for some reason, has chosen not to do so.

The Microcredit Act 2021, which was discussed in last week’s article, has adopted a 21st-century approach to communication, generally. It places a legal obligation on regulated institutions to, inter alia:

• Promote greater transparency and disclosure of terms of pricing and terms of products;

• Calculate and disclose the effective annual interest rates which take into account all fees, charges, and interest due and payable on the loan’ for borrowers to make meaningful comparisons;

• Provide a transparent loan agreement that meets minimum standards specified in the law; and

• Provide a fact sheet containing key terms of the loan agreement as well as conditions of the agreement.

The drafters of the Microcredit Act and the folks at the OUR are not the only ones to adopt a 21st-century communication strategy. Other institutions, notably, the Planning Institute of Jamaica, the Statistical Institute of Jamaica, the Bank of Jamaica, the Ministry of Health and Wellness, and the Ministry of Finance and the Public Service have implemented similar plans. I read the Ministry of Finance’s Citizen’s Guide to the 2021-22 Budget before the live streaming of the minister’s presentation to Parliament and did not find myself falling asleep. Had the Speaker of the House and members of the parliamentary opposition done the same, requests for hard copies of the minister’s presentation would have been superfluous.

That said, would it not be consistent with the example set by the finance minister if all the agencies that fall under his portfolio, for example, the FSC, be directed to modernise all aspects of their communication strategies? This would be one way of promoting greater access to financial services by low-income groups while protecting the rights of consumers and the integrity of the financial system, and,more specifically, put pressure on insurers and intermediaries to modernise their claims processes.

- 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.