The GISC consultation document does not attempt to present a draft budget, nor does it tell us what alternative funding options were considered. I consider the present funding proposal to be unsuitable for the reasons that follow.
First, the GISC has no idea what funds the current proposal will generate or whether they will be sufficient to meet their funding requirement. Second, the proposed formula will be expensive to monitor and apply, which will only add to the administrative cost of the new council. Third, the minimum fee of £300 places an unfair burden on smaller intermediaries. There was uproar when the Government wanted to impose a fee of £60 on every corner shop to fund a food safety regulator. The idea was dropped.
Fourth, the GISC is seeking draconian powers of enforcement. If anyone disputes their liability or refuses to pay for any reason, they can simply be put out of business. Do we really want them to have this power? Fifth, while the funding comes from the industry, the public will not have confidence that the GISC is truly independent.
What are the alternatives? There is already a very effective mechanism in place to extract money from the insurance industry – the insurance premium tax. The Government already collects five per cent on general insurance premiums; if it rebated just 0.025% to fund the GISC it would still be left with 4.975%. Over a year any initial shortfall would be more than made up by the increased tax collected on the premium increases that are widely expected.
This clearly demonstrates that the Government could fund the insurance regulator. It would have the following advantages: the GISC would know in advance how much money was available to it and could plan its budget accordingly; the cost of collection is almost nothing as the mechanism is already in place (compare this with the cost of calculating and collecting 30,000 different payments every year); there would be no need for the present proposed powers of enforcement; and, with funding coming from the Government, the GISC would be seen to be truly independent.
All this seems to me to be common sense. I hope others in the industry will lobby for this change and send their own responses to the GISC.
Medical Fees Insurance Agency
Wording errors that shame us
In a previous letter I referred to the motor trade contract. A letter addressed to the general manager of the insurer concerned produced the following response: "The policy wording is being clarified in the next reprint, due early 2000. In the meantime, let me confirm that we would not use the wording in a manner that would prejudice our policyholders' interests."
What arrogance! Having given my undertaking not to name the insurer concerned, I will not do so now. The insurer is a respected market leader in the motor trade and to my knowledge has been aware of the deficiencies in the wording since early 1999.
Can I remind them of the words of Lord Justice Scrutton in the case of Rozanes v. Bowen (1928): "As the underwriter knows nothing and the man who comes to him to ask to insure knows everything it is the duty of the assured... to make a full disclosure to the underwriter without being asked of all the material circumstances. This is expressed by saying it is a contract of the utmost good faith."
How can we expect to gain the respect of the insuring public if we demand one set of standards from them but practise another? How can any insurer continue to market a policy that it concedes is open to misinterpretation? How can any insurer continue to allow its agents (including its club agents) to sell a policy that could have ramifications for the agent concerned? Equally, how can any intermediary call itself professional if it sells a policy that quite frankly is "not in the client's best interests"?
The insurer should immediately withdraw the offending policy. The insurer concerned should identify all the policies that have been issued and reissue a new wording. In fact, they could gain kudos by issuing a new 12-month contract at no cost to the client. The insurer concerned should write to all its agents pointing out the deficiencies it knows about in this particular contract. The insurer concerned should tell all its staff of the problem.
If we want to be a profession, I would suggest that the following be implemented:
Reinsurers advise insurers that the reinsurance protection will not apply to any claims paid as a result of known deficiencies in policy wordings. Professional indemnity insurers should incorporate into their wordings an exclusion covering claims brought against intermediaries by clients who have been sold this particular contract after a certain date. Simon Bolam and Andrew Paddick should advise members of their respective organisations not to sell the particular product until the wording has been addressed.
If we are happy to continue as an industry the solution is equally simple. Insurers should take an advert in the national press advising of a defective product and requesting a recall.
Over the years insurers have given superb impressions of lemmings. Perhaps by coming clean we will enhance our reputation and actually take the first step on the road to professionalism.
Web trading is the future
I was surprised to read Russell Dadson's comment: "On-line trading does not give advice, answer questions, give reassurance or speed up the transaction." (Insurance Times, November 18).
It is possible for web commerce to achieve all these things and more. It depends on the technology; too many early attempts were little more than complicated electronic proposal forms.
At its best, on-line trading can be simple, cheap, flexible, interactive and fast. Above all, it frees up the broker's time so that he can use it to add value for his clients.
Lloyd's of London
Where's the liability policy?
I have received from the Norwich Union a booklet entitled How to avoid hiring the bad guys. It is designed to help the homeowner choose between a cowboy and a bona fide tradesman. But, with all their dos and don'ts, there is no reference made about asking to see their public liability policy.
To me this is possibly the most important question because, if they don't have PL cover, you don't want them in or around the house and the likelihood is that they are the baddies.
Credit hire does care for clients
After reading yet another attack on the credit hire industry from Paul Asplin of DAS (Insurance Times, November 25), I want to put the record straight.
My credit hire company supports the victims of road traffic accidents, my clients. They have nothing but praise for my employees and the service we offer. My company is a subsidiary of Avis Europe, whose "We try harder" ethos applies to everything we do. We don't just provide replacement cars – we fund repairs, administer claims, represent our clients and arrange legal advice where necessary.
We don't just process a claimant into the cheapest car possible to minimise our claims cost, as the ABI initiative is set up to do. We care about our customers.
Dimond v. Lovell has regulated our industry. My company complies with the Consumer Credit Act. Furthermore, it has just introduced a "Safeguard" product to ensure our clients are not exposed to unacceptable personal financial risk by entering into a credit hire or credit repair agreement.
I believe the House of Lords appeal will go one way only – the Lords will see the attack from the insurers for what it is: technical arguments based on overly-complex legislation designed to protect the consumer being used against the consumer's interests.
The death of the credit hire industry will remove the post-accident protection for non-fault RTA victims. The insurer of the tortfeasor will never act on their behalf in a blatant conflict of interest.
My firm will continue to support the interests of the non-fault victims of RTAs whether the legal profession injects common sense in January or we continue to fund the legal profession single-handedly with more complex counter arguments.