Susan Gordon, Business Reporter

The Financial Services Commission (FSC), the single regulatory organisation in Jamaica for the insurance sector, says based on the law under which it operates, it cannot force companies to insure vehicles driving on Jamaica's roads, nor stipulate the pricing of premiums.

The regulator, which operates under the Insurance Act of 2001, says it has no legal power to protect motor clients.

The reason for this, says the FSC, is that it has no authority under the Motor Vehicles (MV) Insurance (Third Party Risks) Act 1941, even though it has oversight of the companies that underwrite motor coverage.

"We have no power to regulate under that act," says FSC Senior Director of Insurance, Leon Anderson.

"Our insurance rules deal with acknowledging or paying and settling claims resulting in motor vehicle accidents," he said, referring to existing policyholders.

So, if your vehicle or vehicle type is among those blacklisted by an insurance company because it is in the accident-prone or frequently stolen category, it may be pointless to take your complaint to the FSC.

And, for that matter, there may be no regulatory authority to which you could complain since at the time the M/V Third Party Act was legislated, it fell under the Ministry of Communications.

The M/V Third Party Act, according to Section 4(1), makes it mandatory for a person using a motor vehicle on the road to have a policy of insurance in force, but based on the FSC's claim, insurance companies are at liberty to deny motor insurance, without the regulator's interference.

limited options

What this means is that the motor vehicle owner who is denied coverage is left with limited options - either to ditch the vehicle or operate illegally - since licen-sing and fitness registration is contingent on proof of insurance, which is verified by the tax authorities before issuance.

Sunday Business understands that an estimated 25 to 30 per cent of the cars on the road are uninsured.

The Government self-insures much of the state agency fleets, but it remains unclear whether an individual also has that option.

Among the groups hardest hit by blacklisting and high premiums are taxi operators, who complain that the insurance companies have never shared data to justify the practice.

"I don't see how taxis are contributing 'X' per cent of the claims; they need to start sharing that information with the public," said Willard Costly, head of the Jamaica Association of Hackney Carriages.

The FSC does regulate the companies that offer motor insurance, since they are categorised as 'general insurance companies', underwriting other policies for property, the workplace, fire and other disasters, as well as other risks.

But the regulator's interest is focused on ensuring that the operations remain solvent.

The problem arises with motor insurance, because motorists are required by law to subscribe while other coverage is by choice.

"Our responsibility is to ensure the insurance companies manage their risks properly and ensure that they are solvent," says Anderson.

"We will close you down if you are not solvent," he adds.

Breaches of the the M/V Third Party Act are considered criminal offences.

"The Third Party Act is for the police to investigate, prosecute and deal with persons having no licence," said Anderson.

"If an accident results in a loss, the insurance company settles the loss or claim in terms of the insurance contract. We protect the consumer, once the claim is valid."

The FSC also has no say in premiums charged, which Anderson said this is considered a commercial decision by insurance companies and dependent on market forces.

"We don't stipulate what they must charge. We want to know they are solvent companies with enough capital to pay out claims."

He said the FSC sends out actuaries to assess the levels of premiums in relation to claims. If a company is making losses, the FSC will look at its claims experience and make suggestions.

It is also clear that some of these suggestions play themselves out on how the insurer treats with certain classes of vehicles.

"If there is a class of motorists or category of policyholders who run up claims through accidents," said Anderson. "then for that class of motorist where the company is paying far more claims than it is receiving in premiums, we are going to tell them to review their claims experience along with their premium."

"But we won't tell them not to renew their premium," the FSC director said.

In year 2006 motor insurance premiums had an underwriting loss of $897 million.

Of the 11 general insurance companies operating in Jamaica, only four made a profit.

The gross claims paid out by the 11 last year totalled $6 billion while premiums paid between January and December was $8.2 billion for motor vehicles.

Asked whether the FSC would consider taking on aspects of the Third Party Act, Anderson said: ÒNo is my first reaction. The bulk of it is for the police for breaches. We would have to study it and carefully see if we could take on aspects.Ó

susan.gordon@gleanerjm.com