The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Eliminating 90-day "cover notes" will fail to curb uninsured drivers while increasing the risk faced by insurance companies, the Bahamas Insurance Association's (BIA) chair warned yesterday.

Emmanuel Komolafe told Tribune Business there was a mistaken belief that the number of uninsured drivers on Bahamian roads would decrease if insurers stopped issuing such notes as a way to manage premium receivables.

Obtaining 90-day "cover notes" to enable a driver to pass the annual Road Traffic vehicle inspection, only to cancel coverage without paying the full premium, has become a common practice among many Bahamians. It has led to a situation where some in the insurance industry believe up to 40 percent of drivers on the nation's roads lack the necessary coverage.

While some have called for the industry to cease issuing "cover notes" as a means to combat the problem, Mr Komolafe said doing so would create "far greater risk" for the insurance industry.

He explained that the only alternative open to the sector would be to issue clients with the full Certificate of Insurance, thereby opening up the possibility for drivers to escape paying the full premium and drive around undetected for a whole year.

"You can't licence your vehicle without having some type of insurance; you have to present a 90-day cover note or Certificate of Insurance," the BIA chairman explained. "A lot of times people take out insurance and subsequently cancel it. It happens often. People may argue that if you discontinue the 90-day cover note it may address the problem [of non-insurance] but it won't. Here's why.

"Ninety-day cover notes are issued when clients are unable to pay premiums at once, so they enter into financing agreements. It's a way to manage receivables through agents and brokers as long as you have the challenge where persons are unable to pay their annual premium at once.

"If you provide them with an Insurance Certificate you will have the same problem. It is an annual certificate. If you give them an Insurance Certificate and they do not pay the annual premium in full, you have a bigger risk from an insurance company perspective than if they're driving without an Insurance Certificate."

Mr Komolafe spoke out as he renewed calls for greater "two-way" collaboration between the insurance industry, Road Traffic Department and Royal Bahamas Police Force as the best way to combat the increased threat to life posed by rogue drivers.

He said the BIA aimed "to schedule a meeting" with newly-appointed minister of transport, Renward Wells, to discuss the issue "in the next couple of weeks", pointing out that the Road Traffic Department's current system has "a lot of potential" when it comes to stamping out abuse.

Describing the menace posed by uninsured drivers as "a significant issue" that needed addressing "urgently", Mr Komolafe told Tribune Business: "Depending on who you speak to, some persons say 40 percent of vehicles on the road lack insurance, and some say it's 25 percent of one in every four vehicles.

"It's difficult to ascertain, but it's a major problem, and a lot of times the innocent party will not be aware until an accident happens."

The BIA chairman said property and casualty underwriters notify the Road Traffic Department when auto insurance policies are cancelled, or lapse, once vehicles are inspected and licensed.

"The problem then becomes what the authorities do when they have that information," Mr Komolafe added. "We do provide the information, but what's it used for? That's where the problem lies.

"The expectation is that there will be follow up and requisite actions taken based on the information provided. There are opportunities for collaboration. We have a common objective to make the roads safer and persons driving on the roads properly insured."

Calling for better use and leveraging of technology, the BIA chairman said an opportunity for enhanced information sharing between the insurance industry and authorities had been missed with the installation of Road Traffic's new IT system.

"When the current Road Traffic system was implemented we had a number of discussions with persons driving the project to ensure we could work together, but the timing and self-imposed deadline made it impossible," Mr Komolafe told Tribune Business.

"We were told this would perhaps be revisited at the second stage of the program, but not much has happened since. There were some data protection concerns at the time, and what was recommended at the time was for the Insurance Commission to work with the Attorney General's Office to work with the Data Protection Commission to address any concerns the insurance industry had with the sharing of information.

"Moving away from that was the function and amount of data required. None of those points were insurmountable, and could have been resolved. Next time we heard from them they were going right ahead with implementation and perhaps we would hear from them at a later date."

Emphasising that the BIA was focused on saving lives and upholding Bahamian law when it came to the roads, Mr Komolafe added that "reciprocity" was vital to crackdown on rogue drivers and vehicle owners. "Information has to flow both ways for this to work," he said.

"It is apparent that the use of technology by the relevant stakeholders will be pivotal to the success of the enforcement process. Automation and the installation of the necessary infrastructure will be important if we are to address this issue in an effective and efficient manner."