Cedric Stephens | Holding Banking and Insurance Regulators Accountable | Business
Last Thursday’s Gleaner article, “BOJ Slammed for Role in Banking Abuses,” caught my attention. Kudos to members of the House of Representatives Public Administration and Appropriations Committee (PAAC) for summoning Central Bank Governor Richard Byles to discuss “the banking industry’s alleged defrauding of customers.”
The Bank of Jamaica, BOJ, regulates deposit-taking entities such as banks and credit unions. Even though my April 3 comment specifically addressed how banks and insurers mistreat one customer segment – senior citizens – the same goes for other consumers. Many people have told me that they hate visiting banks.
When will PAAC extend an invitation to Everton McFarlane, the Executive Director of the Financial Services Commission, FSC, to appear before it to report on its management of this body, and more specifically, to explain what actions this body Much Regulation Takes to Protect Buyers Insurance?
Some banks have insurance companies and/or plan to start this activity. If the allegation of defrauding customers in banking is true, is it unreasonable to expect these unfair business practices to spread?
These questions are being asked on behalf of a consumer who owns two cars insured by separate companies. His negative experiences with these insurers, which control 25% of the market, led him to explore the possibility of self-insuring his vehicles. Auto insurance, he says, is a big racket. He has no confidence in auto insurers. Purchasing coverage from other insurers would be a waste of time and money if it was not required by law. There is evidence to suggest that this is not an extreme view.
The government’s financial inclusion strategy, which is spearheaded by the BOJ, is unlikely to succeed if this fundamental problem of trust remains unaddressed.
Automobile liability insurance is required by law. However, does the Motor Vehicle Insurance (Third Party Risk) Act, MVITPRA, allow a vehicle owner to comply with the law without having to purchase insurance from a registered motor insurer? Section 4(1) of the act gives an affirmative answer. It reads: “Subject to the provisions of this Act, no person shall use, cause or permit another person to use a motor vehicle on a highway, unless that there is in force with regard to the user of the vehicle by this person or this other person, as the case may be, such an insurance policy or such guarantee for the risks of third parties in accordance with the prescriptions of this law.
The law permits the use of a “warranty” as a substitute for an “insurance policy”.
Article 7 of the MVITPRA prescribes that the guarantee must “be given by an insurer; and consist of an undertaking by the insurer to make reparations, subject to the conditions specified therein and up to the limit, in the case of the undertaking relating to the use of any motor vehicle, of at least one million dollars in respect of each vehicle, any failure of the owner of the vehicle or any other person or class of persons, as specified in the warranty, to discharge duly any liability which must be covered by a policy of insurance under section 5, which may be incurred by him or them.
Simply put, insurers have a monopoly on providing auto insurance and its legal substitute. The guarantee must be provided by an insurance company and the guarantee must operate like an insurance policy.
While the Offices of Utilities Regulation has overseen utilities as monopolies, its insurance counterpart, the FSC – and its forerunner, the Office of the Superintendent of Insurance – has never treated utilities as monopolies. car insurance on a comparable basis, even if there are no other providers. .
Jamaica’s 25 credit unions, with an asset base of $143.63 billion as of June 2021, according to the Observer, “are collectively less than a tenth the size of the island’s eight commercial banks, which have assets of $2 trillion as of March 31, 2021. They have 1.04 million members out of a workforce employee of 1.26 million people”. These data suggest that credit unions are seen as substitutes for commercial banks and evidence of commercial banks’ inability to meet customer needs.
I don’t know what the PAAC’s mission is. It should conduct a review of the auto insurance industry. If I agreed to do so, I would volunteer to provide 100 hours free of charge to research and prepare briefing materials on his behalf on any anticipated interactions between Committee members and agency representatives. regulations.