Letters

No power struggle

You are incorrect in suggesting in your article “ABI and GISC in counter claims” (August 3) that the Association of British Insurers (ABI) and the General Insurance Standards Council (GISC) are poised for a power struggle over claims standards.
Both the GISC Rules and the ABI General Insurance Claims Code share a common purpose – to ensure that the industry acts to the highest possible standards in all aspects of
its business operations. Both initiatives are about putting the customer first.
The ABI Claims Code reflects the determination of insurers to set standards of service which claimants – both policyholders and third parties – can expect when making a claim.
The GISC Rules do deal with claims, but
as your article rightly says, the requirements are less specific. The GISC Board will, in due course, want to consider whether it should set some prescriptive rules on claims handling. At present GISC's priority is to attract maximum support from all sectors of the industry.
We believe that both the GISC Rules and the Claims Code will dovetail together to drive up standards, providing customers with the high standards of service they have every right to expect.
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Chris Woodburn
Chief executive, GISC and John Parker
Head of general insurance, ABI

Broker Network in GISC?

I refer to the letter published August 3 from the Broker Network's Grant Ellis, supporting the GISC. In light of his comments I wonder if Mr Ellis could confirm whether The Broker Network has yet applied for membership of the GISC?
If so, it would also be interesting to learn how The Broker Network intends to address the restrictions on dealing with non GISC members, Rule 42, which was shown as “to be adopted” in the original GISC Rules, but on which further details have recently been separately published within the GISC Rules Amendment Notification.
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Chris Ablitt
Ablitt Insurance Management
Chelmsford
Essex

It's pay back time

In your issue August 3, insurance broker Adrian Moore asks if the insurer should give all the premium back, from policy inception, when a policy is declared void ab initio. The insurer has refused to give back all premiums on the basis that each year is a new contract.
One always needs to look at all aspects of each case and to read the policy which may make a specific provision. Adrian Moore may be correct to demand all premiums back. He quotes a 1993 Ombudsman case, which supports the contention.
Support is given by professor E. R. Hardy Ivamy's statements in his textbook General Principles of Insurance Law:
n The right to a return of premium demand on the fact that the risk contemplated is never run, and there is, in consequence, a failure of consideration in that the assured obtains no benefit from the protection for which he has paid. IVAMY continues “If therefore, no part of the risk is ever run, the whole of the premium must be returned. The policy, however, may specify that the premium will not be returned in any event. The right to claim a return of premium is enforceable by an action for money had and received, and not be an action on the policy.”
n IVAMY advises: “The assured may have been guilty of innocent misrepresentation or non-disclosure in consequence of which policy is voided as from its inception by the insurers. In this case, the policy is voidable at the election of the insurers, and if they elect to avoid it, they must return the premium on the grounds that the consideration for which it was paid has failed.”
My view is that an insurance broker should be fully conversant with procedures in the Small Claims Court where the broker can act as a “litigation friend”. The matter can be resolved there at modest expense... but one must get those procedures right.
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M P Ward
Cumbria Insurance Brokers
Carlisle

Gulf between principles

I read the letter in Insurance Times from Adrian Moore with interest (voiding policies from inception or renewal).
Although I agree with Adrian's suggestion that there should be only one set of insurance principles, regardless of whether we are talking personal or commercial, in practice there is quite a gulf. To some extent this gulf has been created because commercial insurance policyholders do not have access to the Insurance Ombudsman . Although, strictly speaking, the Ombudsman's rulings have never created
case law, they do in effect act as an important yardstick for establishing good insurance practice.
The issue of whether or not voiding a policy ab initio should go back to the original inception, rather than just the last renewal, is an interesting one. Julian Farrand did, indeed, rule that this should be applied back to inception as long as the non-disclosure took place at inception and not some time later. He referred to the fact that some insurers argued otherwise and commented that he was not aware of any legal basis for not going back to inception. He also commented that avoiding going back to inception was “standard practice” within the industry.
If Adrian wants to pursue this, I recommend him to submit a complaint through the Lloyd's complaints department, although it is likely to be a torturous process. If this doesn't work and his client has the stomach for legal action, I suggest the Ombudsman's ruling relating to personal insurance practice will
be a powerful item of evidence in his client's favour.
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Michael Wilson
Pickerings Insurance Claims
Cheshire

Freemason fights back

Re your backchat: Stone Me JJ's off to the Lodge's mag.
I would just like to point out that not all Freemasons are over the age of 50. I am 32 and joined three years ago and know of several other members under the 40-year mark.
I have, however, yet to find another member of another lodge who is also involved in the insurance business – maybe nobody trusts anyone who sells insurance.
I do read Freemasonry Today as I get it passed on by my father, and you might be surprised at some of the articles and just who is involved in Freemasonry.
I look forward to reading the coming issues under the new leadership of John Jackson.
By the way, do you think that the picture of the sheep might over-excite some of the Welsh readers of the Insurance Times?
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Peter Finn
Burkes Insurance
Wealdstone
Middlesex

NU nails its coffin

I cannot believe what I have just been told by my business development executive at Norwich Union (NU), Norwich. We have been finding that NU renewals that were converted from London & Edinburgh last year have been arriving either very late or not at all. On speaking to NU Bristol and NU Norwich, I have been told that they have been put “on hold” because the premiums are so vastly different. Surely NU has no right to do this? Legally or morally? We are the ones who have to take the flack from the client when the renewal arrives late. The ABI code of conduct states that we should invite renewal at least seven days before the renewal date, but we cannot do this in the case of NU, so surely they are putting us in breach of the code? I argue the fact that it should issue the renewal at the screen rate and then if the broker/intermediary can obtain a cheaper quotation they should price match – NU Direct would surely do this.
I feel that this is just yet another nail in the coffin for NU and really does show how much it values the business we give it.
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Phil Warman
Director Warmon and Co
Incorporating:
Brian Chenery Insurance Services
21/22 High Street
Yeovil
Somerset
BA20 1RF

n Norwich Union reply:
“We were not aware that there has been a problem, but if there have been instances
of us sending out late renewal notices then clearly we do need to address that. We should provide sufficient time for interemediaries to handle their customers' renewals in a professional manner. We shall certainly look into this further.”

Piling on the costs

I would like to comment on the piece about Claims Assessors in Insurance Times, July 27 (A chance to offer justice, p.22). You make a good point, which very few have picked up on: companies like Claims Direct are piling on the costs on to the legal process and increasingly it is the liability insurers who are being asked to pick up the tab.
Claims Direct's own prospectus, issued before the recent flotation, gives the amount earned per claim at £1,560 – much of this coming from the purchase by the client of an after-the-event insurance policy. It is well known that the insurance element of this policy is around £200, with the extra £1,000+ going to Claims Direct. Solicitors acting for Claims Direct clients will be seeking to recover the full cost of the policy (£1,312.50) from liability insurers.
If they are successful it will be the thin end of the wedge, with other claims assistance companies taking advantage of liability insurers' apparent generous attitude to paying for insurance premiums that include marketing and other expenses. The cost of after-the-event policies will spiral upwards, and the increased claims costs will be simply passed on to all of us through increased general insurance premiums.
Litigation in this country is a growth industry and I have no problem with increasing access to justice for those who are genuine victims. Any high street solicitor can offer an effective “no-cost” service to a potential client, making the services of claims assistance firms redundant. This will only happen if solicitors begin to effectively market themselves and stop relying on the referral of work from claims assistance firms, or if the costs piled on by these firms are not met by liability insurers, forcing additional costs on to the clients themselves.
Bad news travels fast, and clients will increasingly choose those that offer a true “no-cost” service. Companies will only be able to do this through charging costs that liability insurers are prepared to pay.
What insurers must guard against is a relaxed attitude to the cost of after-the-event policies, many of which are provided through unregulated organisations.
It will be very difficult to reduce the cost in the future, as other comparable premiums will already have risen to take advantage, and there will be few cheaper policies to use as a comparison.
The first point of attack for liability insurers must be policies supporting Claims Direct and others, as the success of these policies will have expensive consequences for all of us in the longer term.
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Emmanuel Gilbert
Managing director, thejudge.co.uk Limited
email: eg@thejudge.co.uk
website: www.thejudge.co.uk

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