Banking Ombudsman scoops insurance

It is not often that we can report good news as we have become numb with crime and disasters which continue to have a profound effect on the national community as well as the insurance industry. However, the Central Bank as the regulator of banks and insurance companies was able to announce  that it had fulfilled the mandate given to it by the White Paper on the reform of the financial system of Trinidad and Tobago by the establishment of the Office of the Financial Services Ombudsman. As we are all aware, there already existed the Banking Services Ombudsman for the past two years to which consumers could refer their complaints against any of the six commercial banks operating in the country.

The idea of an Insurance Ombudsman has been in the making for well over 20 years among those insurance companies that were members of ATTIC since such a dispute resolution mechanism had been in practice in most developed insurance markets. The insurance industry locally is comprised of 31 companies but only 21 are members of ATTIC. Taken as a whole, the ATTIC companies account for approximately 95% of the premium income and therefore all the major and well-known brand names belong to this grouping.

Expanding Services
In view of the move towards a single Regulator in Trinidad and Tobago as the lines between insurance and banking services continue to become blurred, the White Paper recommended the expansion of the Office of the Banking Services Ombudsman into the Financial Services Ombudsman, enabling individuals and small businesses who have complaints against banks and insurance companies to have an avenue for redress. It was only a matter of time before the insurance industry will be subject to the same kind of regulatory oversight that is currently applicable to banks and non-banks, and the expansion of the role of the Banking Services Ombudsman is a clear move in that direction.

Naturally, the next stage is the modernisation of the insurance legislation as identified in the White Paper in conjunction with the updating of the Financial Institutions Act which is well underway and is now the subject of review. The Financial Services Om-budsman scheme as it relates to insurance services is largely patterned along the lines of the scheme that is in operation in the UK, except that in our scheme it includes third party property damage claims arising out of a motor accident. This is an innovative feature as all Ombudsman schemes only address first party matters — disputes between an insurer and its own insured. In our case, we have taken a bold step to include third party property damage claims since our research has shown that there is a significant number of such matters which could be resolved outside of the courts, saving both time and expenses for all concerned.

Outside ATTIC
It is possible that this particular scheme could be a model not only for our Caribbean neighbours —  where no scheme currently exists — but also for other jurisdictions as well. Another distinctive feature is that Ombudsman schemes are generally established by law where all companies must participate as a condition of their licence as in the case of the UK but the Central Bank has used moral suasion in the first instance and it was most gratifying that all ATTIC companies joined while only three non-Attic companies remain outside. Consumers will make their own judgment on those companies that have decided to stay outside of the Ombudsman scheme. Clearly, from a consumer standpoint it will be incumbent on brokers in particular to disclose to their clients those companies that are not in the scheme when placing business.

Settling Disputes: No Pension Funds
Naturally, while the Ombuds-man scheme is an important building block in the whole regulatory framework and provides a mechanism for redress and dispute resolution at no cost to the consumer, there are matters that will be outside the scope of the Ombudsman’s authority. For example, the Ombudsman can only entertain matters where the dispute arose after January 1, 2004 and no legal action or arbitration has commenced. Matters of risk acceptance whether the insurance company refused to insure or charge increased premiums on account of a higher perceived risk or imposed restricted terms and conditions, investment credits, surrender values and the life on life insurance policies are excluded along with disputes under Group Pension Plans and Deposit Administration contracts. The Ombudsman is not a consumer advocate and cannot take sides.

Decisions are based on overall fairness and equity, general principles of best practice and accepted standards of conduct in the insurance industry and obviously the terms and conditions of the policy. Since insurance is a wide subject requiring expertise in many areas of the business, the Ombudsman will have a panel of experts with considerable experience from whom to rely on advice and guidance. While the Ombudsman’s decision is binding on the insurance company, the complainant is free to reject the decision and to take any other action, including taking the dispute to the court. In short, this mechanism gives the complainant two bites at the “cherry” and the service is free. The Ombudsman scheme is the first step in restoring confidence in the insurance industry. The next step is bringing modern insurance legislation that will address best practices so that Trinidad and Tobago can be assured of its rightful place as the financial centre of the Caribbean.

Email:bkaquing@hotmail.com