Cedric Stephens Spotlight on insurance claims backlog
Should it take more than six months for an accident, a fender-bender, involving two cars insured with the same company to be settled? This question was posed to me after Chief Justice Bryan Sykes reported that the yearslong backlog that existed in the island’s parish courts was no more.
I will answer it in the context of the parish courts’ achievement, the December 2022 Insurance (Amendments) Regulations, and a randomly selected foreign insurer’s claims settlement process timelines.
I aim to spotlight a problem the local insurance industry is unable or unwilling to solve.
Mr Sykes, according to this newspaper, said “the courts’ accomplishment occurred two years ahead of schedule”. Their “active caseload is now below three per cent, which exceeds the international standard by two per cent. There are no other courts in the region – not in the Caribbean, not in Central America, not in South America – that have achieved that,” the Chief Justice said. It “has placed us in a position now to revise the time standard downwards.”
Seventy-seven per cent of cases in the parish courts, known as resident magistrate’s courts, were disposed of in less than 12 months. “We are planning to bring that down to nine months,” the Chief Justice was reported to have said.
When I sat down to write today’s article, I recalled a piece I wrote two years ago titled ‘Hidden Insurance Claims Backlog: What the Chief Justice Can Teach Insurers’. A few salient points from it were:
o The development and settlement of motor claims, to some extent, mirrors the development and disposal of cases in the court system.
o Insurers do not provide the regulators or members of the public with the same level of granular details about their motor claims that the courts publish each quarter. Why is this so? What is the size of their backlog of unsettled motor claims for the quarter ending June 30, 2023, compared to the same period in 2022? Are claims being handled more quickly in 2023 as compared to 2022? When will the backlog be cleared?
o Is the Financial Services Commission monitoring the performance of insurers individually and collectively in these areas on behalf of the public, given the standards outlined in Part XIIA of the December 2022 Insurance (Amendment) Regulations? If analyses of these sorts are not being routinely undertaken, how can we know that these companies are complying with the new rules?
Sharp contrast
According to Section 6 of the FSC Act 2001, part of the regulator’s mission is to “promote the modernisation of financial services with a view to the adoption and maintenance of international standards of competence, efficiency, and competitiveness”. Local parish courts have surpassed international standards. Why has the insurance industry been allowed to operate for so long as though insurers are under no obligation to settle claims fairly and make payments without undue delay, using transparent and effective claims procedures and in accordance with Section 142A, Subsection (3)(d) of the regulator’s Market Conduct Rules?
In July 2020, the industry lobby, Insurance Association of Jamaica, shared details of its strategy “to improve its adjudication process for motor claims to provide a better service to its policyholders”.
This is what I wrote about the plan: 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 absence of specific measures to mark success.
The contrasts between the results that parish courts achieved during the last two years and motor insurers’ claims performance could not be sharper.
Claims process timelines
The activities and timelines below were obtained from the website of an overseas insurer. Its claims procedure has eight steps:
1. Activity: Claim indication – Claims are notified to insurer (or broker) by claimant by way of email, website, telephone call, letters or in person.
Timeline: As per policy conditions but no later than 30 days from the date of loss/accident.
2. Activity: Claim acknowledgement – Receipt of claim will be acknowledged in the form of an email, letter, or text (SMS) message.
Timeline: Within 24 working hours from receipt of claim report.
3. Activity: Appointment of loss adjuster/assessor.
Timeline: Within 24 working hours from time of receipt of the claim.
4. Activity: Conduct loss adjustment.
Timeline: Within 24 working hours after receiving appointment.
5. Activity: Registration of claim on computer system.
Timeline: Within 72 working hours from notification.
6. Activity: Analysis of policy coverage and claims details to form opinion.
Timeline: Within 120 working hours from receipt of loss adjuster’s report and submission of all supporting documents.
7. Activity: Communicating offer of settlement or rejection of claim.
Timeline: Within 24 working hours after completion of Step No. 6.
8. Activity: Payment of claim by way of electronic bank transfer.
Timeline: Within 72 working hours from receipt of signed form of discharge.
Are these timelines or something close to them achievable for the local insurance industry? I believe so. Are there companies out there that are surpassing these standards? I would like to hear from them. What is the status of the backlog of outstanding motor claims?
Executive Chairman of NCB Financial Group, Michael Lee-Chin, according to Nationwide News, has instructed senior management at NCB “to immediately resolve systemic issues which have resulted in customer complaints”. My theory is that he has made the connection between sub-optimal profit performance and poor customer service.
Members of the life and non-life insurance industry, it appears, have not made the link. Making improvements in how claims are managed will go some way to reduce the negative perceptions that most persons have about the industry.
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 or business@gleanerjm.com