Doing the right and decent thing - Broker: 0; Insurer: 2

Cedric E. Stephens, Contributor

Question: We bought a 2006 Toyota Noah in 2009. It was insured through a broker. The vehicle was involved in a minor accident in February 2010. Nobody was hurt and our vehicle was not damaged. The bumper of the other vehicle suffered minor damage. We learned later that our insurer set aside $50,000 to pay the third party if he made a claim. We reported the accident to the broker but made no claim. Five months later, we bought a 1991 Nissan Primera. We insured it third party with the same broker/insurer. They told us that because of the accident with the Noah, the premium for the second vehicle would be loaded. We asked if that would affect the insurance of the Noah. They said it would not; we would not be penalised twice for the same accident.

In December, we renewed the policy on the Noah and received a no-claim discount. We received a text message in May 2011 from the insurer. It stated that our policy was due to be cancelled. The premium for the Noah had to be loaded due to the accident. We reminded them that: 1). They had loaded the premium for the Nissan already and 2). We had a signed a contract, paid the premium in full and had received the certificate of insurance. We went to the broker and spoke with almost everyone, including the manager. They told us not to worry because they were in dialogue with the insurer. However, two weeks later, we received a letter from the insurer. I said that we should pay the outstanding premium or the policy will be cancelled. What rights do we have? Can they force us to pay or cancel our policy, even though we have signed a contract?

Answer: Your brokers are the problem - not the insurers. They are being less than honest. Unlike Prime Minister Bruce Golding, they have not done the right and decent thing. They should have admitted their mistakes.

The first one was to load the premium for Primera. Mistake number two was to deduct a no-claim discount from the Noah's premium when there was a chance of a claim from the third party.

Additional premium

Instead of saying that they were talking with the insurers, they should have paid the additional premium from their pocket as the alternative to getting the insurers to force you to pay it.

In a recent report, Scotia Investments Jamaica said that: "After 13 crippling consecutive quarters of contraction, Jamaica's (economy) has recovered modestly ... and that signs have surfaced that the wheels are turning slowly."

The non-existence of growth for this long period has affected the economy. Insurers and brokers - like the Government, many businesses, households and individuals - are not immune from those conditions. Some brokers have buckled under the strain. Insurers have taken steps to increase premiums, ensure that every dollar of income is paid and carefully examine all claims. These are some of the things that are going on in the background that your brokers - had they been ethical - would have explained.

Can your insurer cancel the policy under the circumstances that you have described? This is what a typical policy says about the insurer's rights to exercise that option.

"We may cancel the policy by sending ... days' notice by registered letter to you at your last known address and in such event will return to you the premium paid less the pro-rata portion thereof for the period the policy has been in force."

Insurers can discontinue the contract whenever they feel like. It is as simple as that.

Brokers exist to serve their customers. The company, which in law, is your agent, has done a very poor job for which they are being paid. Given the many hassles that are involved with finding a new broker, I suggest that you fire them at the first opportunity. Consider buying insurance direct from your existing insurer or use the services of a broker that offers better service.

I discussed your case with an official of the insurer. Here is what he had to say: "I have investigated the matter ... and have found our client's information to be accurate instructions have been issued for the notice of cancellation to be withdrawn and letter sent to the client. This is unfortunately a lapse of judgement by an underwriter and steps are being taken to prevent a recurrence."

I am very impressed by the company's customer-centric behaviour.

Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. aegis@cwjamaica.comSMS/text message to 812-7233.