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Thursday, April 8, 2010

Wise words from a veteran in the insurance industry

A friend, a veteran in the insurance industry and now happily retired, wrote to me after he read my three postings: "How an insurer mess it up for me", "Why must motor insurers be allowed to have it both ways", and "Market value: What's that?".

He commented: "I agree with you that your insurers did a lousy job in your case in settling the third party claim. I suppose that in their anxiety to save legal costs (if the claim were disputed unsuccessfully) they took what they considered the most economical option, without investigating thoroughly.

"This, in my view, is lacking in professionalism and to some extent is a sad reflection of the state of affairs in the industry.

"From my own past experience, most Claims personnel have no legal training and they are there to manage as best as they could, often arriving at decisions subjectively with the sole objective of saving money for the company.

"Only in major cases where the claim amounts run into tens of thousands of dollars would their lawyers be called in or the top management being involved.

"On the subject of premium increase ,I agree with you too that there is no transparency. During my days, there was what was called a Tariff (which all insurers are obliged to use) and although this was a cartel, motorists at least knew exactly what basic premium they had to pay and if there were premium 'loadings'' for poor claims experience etc at least they knew exactly too what loading was demanded.

"If they didn't like it they could shop around for another insurer who might be prepared to charge a lower premium loading ( the basic premium always remaining unchanged).

"In today's free market environment,which supposedly encourages better competition for consumers' benefit, no one knows exactly how premiums are arrived at from one insurer to the next. Hence, as you've concluded there's no transparency absolutely!

"As for the authorities, you can forget about their taking action to regulate insurers insofar as premium charges are concerned. The main supervisory role of MAS nowadays is to supervise the financial health of insurers and professional misconduct.

"Where premiums are concerned it is the avowed policy of the government to allow market forces to reign supreme. This is supposed to be, like many other things, good for the consumers. They cannot turn the clock back!

"The fact that year in year out the motor insurance industry shows underwriting losses (audited figures) does not suggest that insurers on the whole are having an easy time.

"Compare this to the days when motor insurance premium was Tariffed. The Tariff rates were implicitly approved by the authorities and any general increase or changes to the rating had to be approved by the authorities, and such increases had to be justified with statistics from the industry.

"I suppose if the general body of motorists can make out a case to the authorities, of profiteering by insurers or cartelling, this might persuade them to do something."

Those are indeed words of wisdom from one who had seen how the industry operated from the inside.

I hope those who have a genuine interest in fair play for not just the policy-holders but also the players in the insurance industry would heed his words and take the necessary action.

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