QUESTION: I have insured my car with Dyoll for the last five years. It was involved in an accident in February. My driver was at fault. The cost of repairing my car was estimated at $650,000. In view of the problems with that company, will my claim be paid? If the company fails to pay the third party, will I be liable to do so? I heard that another insurer has taken over the local operations of Dyoll. Shouldn't that company pay the two claims?
B.S., Kingston, 7.
ANSWER: You are in the same leaking boat as Dyoll's Cayman-based customers. Your claim is unlikely to be paid any time soon. It is the same thing for the third party's claim. And, if that happens, it will be x cents in the dollar. This opinion is based on my chat with an official of the regulators (the Financial Services Commis-sion), careful reading of public information and adding "two plus two." The bottom line: claimants, shareholders and others will foot the bill for the mess.
You are not correct. Jamaica International Insurance Com-pany (JIIC) has not taken over Dyoll's local operations. It bought the latter's local clients on March 7. Liabilities (or claims) incurred before that date were not part of the agreement. Customers with claims filed before March 7 will have to deal with Dyoll's Temporary Manager. The FSC appointed him under section 8 of the FSC Act. The manager and JIIC's parent, GraceKennedy, said in a press statement that "... all existing claims will be handled by the temporary manager." JIIC will, therefore, not be paying to fix your car or settling the third party's claim.
BEST CASE
In a notice dated March 10, the temporary manager provides clues about how your case and others will be handled. He says "outstanding claims will be dealt with." The statement that follows it is of significance: "The extent of the assets and liabilities of Dyoll will be determined as quickly as possible." These declarations mean at least two things. If Dyoll's assets are greater than its liabilities claimants are likely to get paid in full. This is the best case. On the other hand, if the liabilities exceed the assets, you and the third party may end up getting less than 100 cents for each dollar you have claimed. "Dealt with" means claims will be settled, subject to funds.
REINSURANCE TREATIES
Dyoll should have reinsurance to protect itself. Given what took place in Cayman one should not place too much on this source of funds. Note 30 to the Group 2003 audited financial statements says the "Insurance subsidiary's 2003 reinsurance treaties limits its liability to a basic maximum amount of $7 million (2002: $7 million) on motor". Talk about fog! Does the limit apply to any-one-accident? Is the reinsurance triggered when claims exceed $7 million during a year? Is it restricted to personal injury claims? Who knows?
You may end up having to pay the third party. This assumes that the assets of Dyoll Insurance are less than its liabilities. This would be unfair. You were a loyal customer for many years. Unhappily, when insurers go bust there is no plan in place to protect customers. Commercial bank depositors, on the other hand, are covered up to a limit of $200,000 per account (I believe). Why the separate treatment for these two sectors of the financial system? Banks are, perhaps, more important than insurers.
A PROMISE TO PAY
There are many lessons to be learned from the Dyoll fiasco. The first: never believe the ads. Who would believe that "Trust Dyoll, it pays," would turn out to be mere words with no 'backative'. Secondly, buyers need to start paying attention to things other than cost when buying insurance. Questions need to be raised about the financials of prospective insurers. Insurance is, simply, a promise to pay.
Information about reinsurance protection and the financials can provide clues whether the company will be around to deliver. If you buy coverage through an agent or broker and they fail to supply this type of information as a matter of routine, start looking elsewhere.
Finally, I hope for your sake, that my worse case scenario does not turn out to be true.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com
