Cedric Stephens | IAJ falls short on claims strategy

ADVISORY COLUMN: RISKS & INSURANCE

I am indebted to the Insurance Association of Jamaica, IAJ, for providing content for today’s column. President Vernon James, Vice President - General Insurance Mark Thompson, and Executive Director Orville Johnson, I am grateful to you for sharing some key elements of your association’s motor claims management strategy.

As Mr Johnson explained, its aim was to “outline some of the things we are doing to improve the claims adjudication (process) as well as raise some of the issues that impact the association’s members' ability to deal with claims”.

When I first sat down to write 'A Short History of the Insurance Industry and Slavery', I had no idea where it would lead. Writing the second part was hard. I posed eight questions to today’s local insurance practitioners, most of them descendants of enslaved persons.

My aim was to move beyond the call for reparations for slavery. Were there lessons that could be learned and applied from the sins of insurance practitioners in the past in relation to slavery? Was there clarity and certainty about what were acceptable ways of conducting business during the 21st century?

Because all descendants of slaves share a common past, I argued, policyholders and others who encountered the industry should always be treated with dignity and respect. The industry’s standard of performance should be measured against the minimum yardsticks mandated by the insurance regulator.

The aim of today’s column will be to review and analyse the IAJ’s claims-management strategy in the context of last week’s article. Last Wednesday, I spoke twice by telephone with an unhappy motor insurance claimant. She initiated the call. She said that she had spent nearly 10 months in a vain attempt to obtain a recovery for a collision. Some of the information that this claimant shared will also be used as part of the background for my comments.

IAJ strategy statement

“The IAJ is seeking to improve its adjudication process for motor claims to provide a better service to its policyholders. This is one of the areas of focus for the recently elected IAJ president and vice-president-general insurance of the new IAJ administration.

“Last year, the IAJ handled over 50,497 claims, which represented an almost 14.2% increase over the previous year. This has put pressure on the claims-adjudication process.

“The IAJ has introduced initiatives and processes to improve the pace at which claims are handled, but with the increased level of crashes on the road, it is forced to step up its game. The efforts are further complicated by the number of uninsured vehicles on the roads that often end up as what we term ‘no report’ cases, where uninsured motorists disappear after tendering false insurance documents, which ends up making it difficult to establish liability for a crash.

“The association has sought to enhance the process by utilising a protocol which uses precedents from previous cases, along with the road code for the speedier establishment of liability. Since COVID-19, we have been utilising digital solutions to reduce time-consuming paperwork as well as to have more virtual meetings. This has improved time management and, therefore, increased the efficiency of the claims-settlement process.

“Additionally, the IAJ will be implementing its Insurance Vehicle Insurance System, IVIS, soon which is expected to reduce the ability of persons to use fraudulent cover notes, thus reducing the problem of ‘no reports’.

“Motorists are encouraged to use dash cameras on their vehicles so they will be able to have concrete evidence of their crashes that can go a long way in settling liability in cases. Some companies also give incentives to persons who use dash cameras. Many claims settlements are delayed as both parties insist that they are right and expect their respective insurance companies to support them regardless of the facts.

“As indicated earlier, driver behaviour contributes a lot to the number of crashes on the roads. The IAJ continues to press the Government to expedite the enactment of the new Road Traffic Act, which will enhance driver behaviour through stronger sanctions and improve enforcement.

Also, the implementation of a proper ticket management system will provide a tool which insurance companies can incorporate in their underwriting process as is done in many jurisdictions. This system penalises delinquent drivers with higher premiums as well as weeding some of them out of the system.

“We are committed to improving claims administration as well as seeking to address some of the root causes of the unacceptably high motor claims. In 2019, we incurred $13.2 billion in motor claims, an increase of 14.7% over 2018. In the final analysis, higher motor claims result in higher motor premiums, so nobody wins. We must all work together on this.”

Review and analysis

IAJ represents the interests of all insurance companies, life, and non-life. It is not clear what factors drove the decision to focus attention on the motor insurance claims process and ignore the process for the life-health segment.

I am not optimistic that claimants will see any improvements in the motor claims process any time soon. This is based on the quality of the IAJ’s analysis of the problems that consumers and the industry are facing, the lack of data that informs the current improvement efforts, and the absences of specific measures to mark success.

The association’s expectations about IVIS are too rosy. This conclusion is founded on the experiences of insurers in the United States.

The Insurance Information Institute reports that “in 2015, about one in eight drivers were uninsured, according to a 2017 study. The percentage has been rising since it hit a record low of 12.3 in 2010. Florida had the highest percentage of uninsured motorists, 26.7 per cent”. This is happening despite the introduction of measures like IVIS and new laws.

In Jamaica, it is estimated that about one in four vehicles is uninsured.

In February 2019, insurance regulator Financial Services Commission, FSC, enacted a series of revised rules stipulating how the business of insurance should be conducted. Among the topics covered were integrity and fair dealing, care, skill and diligence, disclosure of information, information on customers, conflicts of interest, complaints handling, claims management, and insurance fraud and compliance.

These rules were developed after consultation with the industry. The IAJ’s 2020 initiatives “to improve the pace at which claims are handled” have not mentioned any of the things listed by the FSC or indicated whether they would be complied with.

The strategy statement does not indicate whether there is a consensus among members on how consumers should be treated.

COVID-19 has presented the insurance industry with an opportunity to significantly improve its public image and increase its contribution to society by articulating a clear vision for the future. Sadly, the strategy statement fails this test.

Bottom line: the strategy paper has not earned a passing grade.

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.