By NEIL HARTNELL
Tribune Business Editor
A WELL-known QC has urged insurance companies to be “fair and generous” with Hurricane Matthew victims over claims settlements, calling on them to avoid “a repeat performance” of 2004.
Fred Smith QC, the Callenders & Co attorney and partner, lamented the failure of both FNM and PLP administrations to enact legislation that would better protect Bahamian insurance consumers when it came to obtaining just settlements/payouts.
He told Tribune Business that he was already receiving reports that insurance companies were placing ‘obstacles’ in the way of devastated claimants, such as providing two separate quotes for the cost of home/business premises repairs in Matthew’s wake.
“Despite many, many years of complaints about the insurance companies being fair and generous in settlements with homeowners, I’ve already received stories that some insurance companies are being difficult,” Mr Smith told Tribune Business, “digging their heels in and refusing to advance monies on account of repairs.
“They’re insisting on a couple of quotes on the cost of repairs, and it’s far too early for many people to be able to get sensible, competing quotes. Some of them will not know the full extent of the damage.”
Mr Smith continued: “You may recall in the aftermath of Hurricanes Frances and Jeanne how difficult it was for claimants to get a fair settlement, and I called on the Government to enact legislation to protect consumers. I hope that this will not be a repeat performance by the insurance industry.”
Concerns are often expressed by policyholders that loss adjusters, sent out by property and casualty underwriters to assess the extent of damages and likely value of a claim, frequently seek to ‘beat down’ the payout figure.
There are also complaints, not just in the Bahamas but worldwide, that insurers also seek to escape payout liability on technical grounds, using conditions and clauses contained in the policy contract.
Evidence to back such claims is often hard to obtain, but Mr Smith said he advocated for numerous clients against the insurance companies when Hurricanes Frances and Jeanne hit the Bahamas in 2004.
He added that “much of the work we did then on insurance claims was pro bono”, meaning it was done in the public’s interest and/or without charge to the clients.
Mr Smith, though, hinted that he may be restricted in carrying out such work again, given that his legal work for organisations such as Save the Bays and the Grand Bahama Human Rights Association (GBHRA) is consuming much of his time.
“Nothing was done by the FNM or PLP to protect the insurance consumer,” he told Tribune Business. “That’s a deeply-embedded problem in the Bahamas, where powerful financial interests are favoured over consumers.”
Mr Smith suggested legislation, rather than the courts, was the better method for redressing insurance consumer grievances.
“It’s a government and public policy issue,” he told Tribune Business. “The judicial system cannot fix all social problems. It would be difficult for the insurance consumer to find redress other than through legislative protection.
“Other these last few years, our firm and organisations like Save the Bays and the Grand Bahama Human Rights Association and others have been doing a lot of pro bono work, and there’s only so much capacity that we have.”
The Bahamas Insurance Association (BIA), meanwhile, sought to dispel concerns that homeowners have to first come up with the deductible - usually 2 per cent of the total sum insured - before they would receive Hurricane Matthew-related payouts.
“The payment of insurance claims by local insurance companies will not be hindered by the ability of an insured individual to come up with the deductible amount,” the BIA said.
“Typically, deductibles are incorporated into insurance policy contracts and represent the amount of expenses that an insured will have to pay out-of-pocket in the event of a claim. This payment is not made to the insurance company, and does not prevent the insurer from meeting its obligation under the policy contract.”
The BIA took as an example a $300,000 house, with a 2 per cent deductible, and $100,000 in damages sustained via Hurricane Matthew.
“In this instance, the deductible will be $6,000 and the insurance company will be obligated to pay $94,000,” it explained. “The payment of the $94,000 by the insurer to repair the damaged property is not subject to the ability of the insured individual to pay the $6,000 deductible.
“Our objective as an industry is to ensure that our clients get the money they are contractually entitled to receive as soon as possible so that they can begin to rebuild their lives.
“This goal is not impacted or delayed in any way by the existence of deductibles. Deductibles do not give rise to a wait or waiting period before insured individuals receive funds due to them by insurers.”
The BIA said deductibles enable the insurance industry to offer relatively cheaper premium rates to consumers, and keep insurance premiums down.
“In essence, and all things being equal, the higher the deductible, the lower the premium,” it explained.