Cedric Stephens | Some insurance brokers are clueless
Question: My Nissan motor car was involved in an accident late last year. Another car ran into its back. The estimated cost of repair is $600,000. I have several problems. The other vehicle is company-owned. The accident has not been reported to the other insurer as yet. Secondly, my insurer has offered two settlement options. The broker’s supposed claims adviser is hopeless. She has offered no advice. Finally, even though the accident was not my fault, the broker has said that the premium for insuring another vehicle will increase by 300 per cent. This is as a direct result of the claim. Can you please help? — GJ, Kingston 17
INSURANCE HELPLINE: The company that calls itself your broker is at the root of the problems. Even though it has a licence from the regulator which says it is a registered intermediary under the Insurance Act 2001, it is so in name only. Sadly, it doesn’t have a clue about the functions that professional insurance brokers should perform. Its primary purpose is to make money for its owners.
Insurance intermediation is a sideline. Brokers who put customers at the front and centre of everything that they do make lots more money. They stay in business longer than firms in the other group. How do I know this? I have been studying this type of business for decades and also worked with many of them.
NON-REPORTING BY THIRD PARTY
Drivers that rear-end other vehicles are almost always liable when these types of collisions occur. This was one of the points that last week’s column discussed. Not as well known is that insurers are prevented by law from paying claims where a vehicle is insured but the insured has failed to report the accident.
Non-reporting of an accident by a negligent third-party driver simply imposes a duty on the other party to prove that the mishap occurred.
The pros and the cons of the insurer’s settlement options are as follows:
1. Cash Payment: Your insurer will cut you a cheque in exchange for your agreement to sign a document (a Form of Release). The form says that acceptance of the payment is in “full and final settlement of your claim under the contract of insurance”
Pro: You can try to negotiate a special price with the repairer for an amount that is less than the agreed cost of repair and pocket the difference.
Con: If the actual cost of repair is more than the agreed cost of repair, you will have to fund the difference — our insurer will not; you have no guarantee that the repairer will not use inferior parts if he agrees to discount the estimated repair cost; and it will be your job to ensure that the repairs are properly carried out.
2. Insurer Authorises Repairs: Your insurer would authorise the repairer to fix the vehicle. You will assume no risks if the cost of repair was to increase. On completion of the repairs, you will be required to examine the vehicle to ensure that the work was carried out to your satisfaction, sign a form (a satisfaction note), and pay the deductible. The insured would pay the repairer on receipt of the signed satisfaction note and the repair invoice.
GOODBYE TO INCOMPETENCE?
Last week’s article — “Lawbreakers and accident claims” — contains information about vehicle stopping distances. In theory, this kind of information should be easy for claims service providers to obtain using their desktop computers or from the estimated 2.1 million smartphones plus the tablet computers that are available.
The fact an attempt is being made to separate thousands of dollars in extra premium from you in a case where it cannot be justified suggests incompetence or, something far more sinister.
The writing is on the wall for brokers like yours. Insurance Age, a United Kingdom magazine, which champions the broking community, recently published a most intriguing article on artificial intelligence, which says AI “makes it possible for machines to learn from experience, adjust to new inputs and perform human-like tasks. Most AI examples that you hear about today — from chess-playing computers to self-driving cars — rely heavily on deep learning (for example, recognising speech, identifying images or making predictions) ... using these technologies, computers can be trained to accomplish specific tasks by processing large amounts of data and recognising patterns in the data”.
The magazine says that “InsurTech start-up Zoe has launched with the aim to become an AI-driven insurance broker. The start-up has raised pound400,000 in funding. Zoe will help consumers manage all their insurance needs through an AI-driven personal insurance assistant and mobile app”.
The vision of the founders “is to build a completely AI- driven broker that will be able to give better advice than the human broker because it will be less biased and have access to more information.”
In the meantime, use your smartphone, tablet or desktop to find a new broker. Another alternative: after weighing the pros and the cons, buy coverage directly from an insurer.
- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: firstname.lastname@example.org