Cedric Stephens | Claims delay blame game

ADVISORY COLUMN: INSURANCE HELPLINE

Justice of The Peace Melvin Pennant, in a letter to the editor two Thursdays ago, spoke about an epidemic of disservice that is being regularly and harshly dispensed to members of the public.

The example he cited was the Jamaica Constabulary Force, JCF. The police were mainly to blame for the non-payment of his insurance claim after six months, he said.

I agree with the letter writer’s main argument. Many institutions, government and private sector, provide poor service. I disagree with him that the JCF is mainly responsible for the non-payment of his claim.

The police force is only one part of the claim settlement supply chain. The latter phrase means the system of organisations, people, activities, information, and resources involved in the claims settlement process. The main actors are: the regulator, the Financial Services Commission; insurer; intermediary – a broker or agent; claimant; loss assessor; other insurers; repairer; parts suppliers; transportation provider; and others.

Given the short distance that Mr Pennant’s claim has travelled, I have built a blame delay chart [see diagram] that assigns values to the parties as follows: the claimant’s insurer – 75%; the regulator FSC − 15%; the JCF − 5%; and the claimant − 5%. In the remaining part of this article I will explain my reasons for the assigned values.

Rationale for insurer’s share of blame:

● The insurance contract does not say that the payment of a claim is conditional upon the claimant submitting a police report to their insurer. The contractual pre-conditions assume that the policyholder complies with the policy terms and conditions and the licensing or other laws or regulations.

● The contractual claims condition imposes a duty on the policyholder to “give full details of the incident in writing” to the insurer within a specified period.

● Giving full details of the incident in writing is generally understood to mean completing the insurer’s accident report form and attesting to its accuracy by signing the form.

● One of the questions on the accident form seeks information about the name of the police station to which a report about the accident was made.

● There is no information on the accident report form that informs the policyholder that obtaining a written police report about the collision and the submission of the form to the insurer are critical for the claim to advance through the settlement cycle.

● Subsection 2 of Section 70 of the Road Traffic Act 2018 – one of the licensing or other laws referred to in bullet point 1 – has changed the rule relating to the filing of a report with the police. If my interpretation is correct, it reduces the value of these reports. It says: “Where, after a collision, the driver of the (other) motor for any reason does not give his name and place of residence to any person as mentioned (in Subsection 1), the (other) driver shall report the collision at the nearest police station or to a constable as soon as is reasonable practicable, and in any case, within 24 hours of the collision”.

The inference appears to be that if the other party to accident has complied with items (a) to (d) of Section 70(1), there could be cases where the police may not have reports of a particular collision. On the other hand, based on the representation of Mr Pennant, and even if the policy contained a provision that the payment of the claim was conditional upon the submission of a police report, it cannot be argued that he failed to comply with Section 70 of the Road Traffic Act.

● Given the preceding points, it was wrong for the insurer’s claims handler to have asked the claimant to obtain a police report in the first place and three months after the accident occurred.

● The FSC’s Revised 2019 Market Conduct Guidelines imposes an obligation on insurers to have “policies and processes in place to handle claims in a timely and fair manner”. A wait period of six months does not meet the timeliness standard. In Malaysia, for example, the regulator told insurers that they must improve the average two-month period for the payment of damage claims.

● Section 11.0 of the FSC’s guidelines impose specific duties on insurers in relation to the handling of claims. They are: Contact the claimant or send an acknowledgment of receipt of the claim in writing within five business days of the claim being received; and send to the claimant, within five business days of the claim being received, a list of the specific documents when required to (settle) a claim.

The insurer did not comply with these rules. The claim fell into a deep chasm in the insurer’s office after it was reported.

● Insurers are required under the guidelines to “ensure that employees in the Claims Department are competent and are qualified to process all claims effectively. Companies must foster and conduct ongoing internal and external training”. It is clear that the claims handler did not meet the required standard.

The rationale for the FSC’s share of the blame:

● Even though the regulator’s Revised Market Conduct Guidelines have been in force since February 2019, and are framed to protect consumers, the commission appears not to have made any effort to bring them to the attention of the public. For example, they were not posted on the FSC’s website up to last Thursday.

● The regulator, according to its guidelines, recognises the importance of its rules. They are designed to promote and maintain public confidence in the insurance industry. It carries out on-site examinations of the regulated entities in order to ensure that they operate.

● The guidelines do not appear to have led to any appreciable improvement in the way that claims are being handled nearly 14 months after they were introduced.

The rationale for the JCF’s share of the blame:

The failure of the police to provide a report confirming the occurrence of the accident played a minor role in the non-settlement of the claim.

The rationale for the claimant’s share of the blame:

The claimant cannot escape some responsibility for the delay. He should have sought information about the settlement process from the insurer, obtain timelines and conduct regular follow-ups instead of ceding those functions to the insurer. I hope that my version of the Blame Delay Game will help to reduce settlement times for other claimants.

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