Insurance Helpline with cedric Stephens

In March last year my car was parked in front of my gate when it was hit by another vehicle. The driver showed me information that it was insured. I recorded the details and passed them on to my insurers along with my claim. I found out later that the insurance was bogus. My insurers have increased my premium because of the claim. Before that I had not been involved in an accident for 10 years. Shouldn't my insurer have tried to recover from the other motorist? Shouldn't the police have had a say in this case? Can I recover my loss-of-use expenses? Why should I be penalised so harshly? I was not even driving when my car was hit?

- danwen51@yahoo.com

I am sorry to hear about your troubles. The root cause of your problem is dishonesty. Bogus insurance is yet another example of the corruption in our society. Members of the police force are not the only crooks, as many persons believe. Bogus insurance affects all of us - you, me, your insurers, other buyers and insurance companies. Even the Government suffers. It loses revenue in the form of GCT. Suppliers and buyers of bogus insurance are not unlike those who make illegal connections to the Jamaica Public Service grid. They shaft those of us who pay the real cost of these services.

The Insurer's Duty

Insurers set out their duties to customers in their policies (or contracts). This is why I always say that buyers should read these documents. In the case of your claim, your insurer's main job was to pay for the damage to your car. They did that. They paid you $119,000. After that they acquired the legal right, according to the policy, to recover from the person who hit your car. The other person turned out to be a crook. I suspect that your insurers decided that the chance of getting money back from this individual was very remote. It did not make sense to spend money for this reason. Insurers make decisions like this every day.

Many persons drive uninsured vehicles or buy bogus insurance. One in every three vehicles on the road is uninsured. As for the size of the bogus insurance racket, not much is known. Evidence of the scam can be found in ads about missing cover note books put out by insurance companies.

Can The Police Bust The Racket?

The police cannot bust the bogus insurance racket without information. After you found out that the driver who hit your car had no insurance, did you file a report with the police? Have you given them details about the other car, its driver, etc., or, did you expect your insurers to do so? If your reply to these two questions is in the negative, as I believe, you know what to do - even at this late stage.

Your Loss Is Not Limited to Loss-of-Use Expenses

You have underestimated the size of your financial losses. They consist of the excess (or deductible) on your policy (say, five per cent of the estimated insured value or $14,500), loss-of-use expenses (estimated at $20,000) plus the extra amount that you have paid for insurance (say, $15,000). By my calculation, this accident will end up costing you nearly $100,000 over the next three to four years. (The impact will not be limited to one year since it takes time to rebuild your no-claim discount). The big question is this: Can those costs be recovered? I doubt so, given what we already know about the other party. They will, ultimately, end up being borne by those of us who play by the rules!

You have given me no evidence to support the argument that your insurers 'penalised you harshly'. To do so, you would have had say by what percentage your premium was loaded as a result of the claim and what you would have paid had there been no claim. Even if you had done so, this would have not been enough. There are at least 10 other companies that sell motor insurance. Were they contacted? I believe that your brokers did a very poor job. They did not shop around. This does not surprise me. Last year they headed the list of brokers that consumers felt performed poorly. I believe that if they had done a better job, the costs that you are now bearing would be much lighter.

Finally, thanks very much for bringing to public attention a problem that has been affecting insurance buyers for a long time.

Cedric E. Stephens is an independent insurance consultant who provides free information and advice about risks and insurance. Contact him directly at aegis@cwjamaica.com.