Central bank rules

The government finally secured the passage of the Insurance (Amendment) Bill in the Senate on May 18 – almost 5 months to the day since the Bill was first laid in Parliament on December 19, 2003. On the surface, the Bill appeared to be a formidable piece of legislation as it contained some 56 pages of amendments to various sections of existing legislation – the Insurance Act 1980, the Financial Institutions Act 1993 and the Central Bank Act. The Bill sought to transfer responsibility for the supervision of insurance companies, insurance intermediaries and pension plans from the Supervisor of Insurance to the Central Bank. The new post will be the ‘Inspector of Financial Institutions’ replacing the Inspector of Banks and the office of the Supervisor of Insurance will cease to exist. 

For the untrained mind, the intention of the Amendment Bill was quite straightforward but the legalese required referring to every section and therefore it required a voluminous draft bill of some 56 pages. It might have been for this reason that the passage was delayed for 5 months! The insurance industry had difficulty in understanding why such an innocuous piece of legislation should take this inordinate length of time to go through both Houses of Parliament. However, the real reason had more to do with legislators who, instead of treating constructively with the Bill at hand, sought to score political points and use the debate to deal with all kinds of extraneous issues that had no relevance to the legislation and only served to delay the Bill’s passage.

It must be remembered that it was the UNC administration in 2000 that agreed to strengthen the regulatory process for the insurance industry by having consultants engaged by one of the multi-lateral lending agencies to address the concept of the Single Regulator for banks, insurance companies and eventually securities and other financial institutions under the Central Bank. The Single Regulator strategy is not new as there are examples elsewhere — most notably  in Singapore. Trinidad and Tobago itself has been studying this model for more than 15 years. In view of the complexities of the financial services sector and the leading role that this sector plays within the Caribbean region, it is opportune and appropriate that regulatory oversight be strengthened if only for the public to have greater confidence in the financial system.

The present administration is merely carrying on the policy of a previous administration and therefore parliamentary passage of the legislation to give effect to the Single regulator should have been achieved without any fuss. However, nothing in life is that simple and instead we had the spectacle that delayed its passage until now. If it took five months for Parliament to sign off on a simple bill there really is little hope to modernise the antiquated laws which are in dire need of revision if we are to move forward as a progressive country. It is time to think and act outside of the box and the country cannot continue on a ‘business as usual’ basis. To address the backlog of legislation there must be a revolutionary plan that sets objectives, targets and time frames starting with the full time sitting of Parliament.

There is simply no way in making any dent if the Parliament continues to meet only for a few hours per week as this is clearly a ripe opportunity for scoring political points rather than treating with the business at hand. If Parliamentarians met on a full time basis they would become used to dealing with legislative matters and the focus would be different as it would not be seen as a media opportunity. It is only then that the business of passing legislation which is their prime reason for being in Parliament would be handled responsibly and that the country could move forward to update its laws which are largely irrelevant and not in keeping with a progressive and modern society.

Now that the transfer of responsibility for the supervision of the insurance industry has moved to the Central Bank, the next step would be the physical movement of staff from the Ministry of Finance and the establishment of a properly staffed division that can be effective in supervising all aspects of the insurance business. The Central Bank has largely been viewed by the public at large as an independent authority with the capability to attract a professional cadre and to regulate and monitor the affairs of the country’s financial institutions. That it is held in high esteem is a reflection of the professional conduct of the Bank and its officers. The Central Bank now has the challenge to take the type of appropriate action that will demonstrate that it will be proactive in addressing the ills of the insurance industry.

There are a number of consumer-related issues in particular motor claims settlements where claimants have always expressed the view that the Office of the Supervisor of Insurance appeared unable to take action against those companies that were delinquent, or whose claims settlement practices leave much to be desired.  While accepting that there are many instances of questionable claims it is too common that the public is treated unfairly by certain insurance companies and it is hoped that the Central Bank could make some timely interventions that can result in improved motor claims settlement practices.

In the more mature developed markets the regulators are very concerned over customer related issues especially as regards the competency and knowledge of intermediaries – brokers, agents and salesmen. This is an area of grave concern in the Trinidad and Tobago context and it is imperative that those persons who hold out themselves as professional and competent must indeed possess the required level of competence in the ever growing complex insurance business. The Central Bank is expected to play a key role in charting the course of the insurance business and the wider financial services sector so that consumers can be assured that their interests are served not only today but well into the future.
E-mail: daquing@cablenett.net