Question: The response to the second letter in your Sunday, July 13, Gleaner column is unacceptable. You have not answered the question.
The writer said that he was insured by one company without an at-fault accident for 12 years. He lost (part of) his 65 per cent no-claim discount due to an accident which was caused by a third party. You skirted the issue.
You told the writer to "shop around" to get a better deal. If you know "the business" like you say you do, then you should have known that in order to get coverage with another company he would have to produce a 'no-claims discount letter'.
Since the long-time insurer will state the loss of discount (down to 35 per cent), this will be the basis on which any prospective insurer will price the new policy. Shopping around will still result in an increased premium and the loss of part of the no-claims discount.
The buyer's claims record/history will also be tarnished. Insurers in Jamaica operate a cartel. They take advantage of consumers.
The Government must ensure that they operate properly. The Financial Services Commission does not seem to have the stomach to regulate them.
Answer the writer's question in a direct way. I want to know how to deal with such a situation having experienced it myself!
- g_jankee@yahoo.com.
Answer: The "no disrespect" postscript was not necessary. I am not offended by your opinions or the tone of your mail. It does not bother me that you disagreed with the way I answered the question posed by the other reader.
On the other hand, I do hope that you are not unduly worried that I edited your mail. This is something that I normally do. It is more because of space constraints than the fact that you sharply criticised me.
The feedback was, actually, very timely.
"Insurance, in terms of products and providers," says the Organisation for Economic Cooperation and Development (OECD), "is one of the most complex, sophisticated and diverse fields in the financial sector." The OECD is a group of 30 countries from North America, Europe, parts of Australasia and Asia.
The group has contacts and "maintains cooperative relations" with more than 70 non-member countries.
Those comments were made in a report, "OECD Recommendations on Good Practices for Enhanced Risk Awareness and Education on Insurance Issues".
The OECD council's proposals were approved by member governments in March of this year. They were written within the context of the world's most-developed economies.
financial literacy
"Households consistently demon-strate," the report said, "low levels of financial literacy in general, but often lack sufficient awareness of the risks to which they are exposed, the ability to correctly assess their risk exposure, and good literacy, knowledge, and skills regarding insurance products and issues."
It recommended that member countries "promote awareness and education in relation to risks and insurance issues".
This column seeks to "promote (local) awareness and education in relation to risks and insurance issues". It is written in the context of a developing country with low levels of literacy in general, and financial literacy in particular.
Consumers here are prone to even more risks than their counterparts in the developed world. Many, like you, distrust insurers.
I try to empower buyers - most times in the absence of the important bits of information - by supplying advice to help them solve or avoid specific problems. My responses are sometimes not black or white.
This has more to do with the complexity of the subject matter, the information at my disposal, a desire to reach a wide group of readers, and the need for balance. If I have a bias, it leans more towards consumers. Insurers seem respectful of my opinions but are among my harshest critics.
If I may be as blunt as you, your conclusion that "shopping around," is a waste of time is rubbish! It is an assumption, not a fact. You offered no evidence to support your claim. Until such time that you supply proof, which shows that other insurers quote the same or higher premiums than the longstanding insurer, it is false to say that "shopping around will result in an increased premium" or that "insurers in Jamaica operate a cartel."
If you have any evidence of this, contact the Fair Trade Commission.
Insurers place more weight on answers supplied in the proposal or application form for motor insurance than on a no-claims discount letter. Why? The contract or policy mentions the former but not the latter.
Some proposal-form questions relate specifically to history - driving, insurance and claims. In suggesting "shopping around," I assumed that other insurers would see the discrepancy between the 12-year no-fault accident history and the 35 per cent no-claims discount.
Loyalty
Also, that after checking with the former insurers about the one reported accident, the other companies would offer to correct the mistake - as they did in my case - by granting the other reader their maximum no-claims discount in order to attract him.
Banks, insurers and other companies, no matter how greedy, listen to consumers. If they do not, some of their competitors will. The combined actions of persons who vote with their feet reduce revenues.
Loyalty to a particular brand or company where the cons outweigh the pros does not make economic sense. Finding out what other providers offer is always a good tactic to keep prices low, especially in these times. Jumping ship when the conditions are suitable is another option.
These are some of the tools that smart consumers use daily to solve their problems. Measures like these prove more effective in the long run than waiting on the Government or Financial Services Commission to act, or bawling out about how insurance companies 'tief'.
Finally, thanks for indirectly leading me to the OECD report.
When its contents are added to the responses that I regularly receive from persons like yourself, as well as other readers, it tells me that this newspaper must be doing a few things right!
Cedric E. Stephens provides free, independent information and advice about risk and insurance. Email: aegis@cwjamaica.com
