18 PROFESSIONALISM


urgent need” for the industry to tackle its reputations and practices. At about the same time Julian James, director of worldwide markets at Lloyd’s told insurance industry leaders in Birmingham that the sector had progressively lost the confidence of capital providers, regulators and customers.


We are now five years on and these comments still ring true. Why else is the CII promoting professionalism?


Neither insurers nor intermediaries are ideally placed to practice as “professionals supplying a service”, as compared to doctors, solicitors and accountants, because insurance is nearly always sold and supplied as a product not as a service.


It is of course open to the insurance community to try to create its own, exclusive brand of professionalism strictly for the insurance community. The difficulty is in persuading the rest of society that “insurance professionalism” should be a different kind of professionalism from what they would otherwise expect it to be. This is particularly difficult because, in law, there is already a substantial body of precedent for the meaning of “professional”.


Contract certainty is not enough The first step in achieving professionalism in insurance must be to publicly make a point of paying claims except where there is an incontrovertible reason for not doing so. The reason for declining a claim must be so obvious to the ordinary citizen that there can be no reasonable doubt that the claim should not be paid.


There are few other contracts entered into in life, with so much at stake, that are given so little attention before committing to it, as an insurance policy. A requirement for contract certainty was introduced to strengthen the relationship between insured and insurer but contract certainty addresses only the delivery of the contract, not its content. That is an inherent weakness of the concept because outside the insurance community people are entitled to believe that contract certainty means contract fairness.


The expression TCF is well known to everyone in insurance but what does it mean in practice? If a policyholder finds that their claim will not be met because of


a ‘technicality’ whereas otherwise there is no reason not to pay the claim is that fair? Some insurers will say yes it is, because the insured had the opportunity to read terms and conditions.


Then is it fair to expect a non-insurance practitioner to understand the “legal and jargon words” in a contract of insurance (which create the “technicality”) without having to pay for legal advice to get it? If the answer is yes then the industry will continue to disenfrachise the trust of the buyers.


For example, many policies contain the word ‘event‘. It is open to an infinite range of interpretation. Insurers can make up their mind on the interpretation of the word after they have seen the nature of the claim and the potential cost of the claim. What the insurers say is difficult for an insured to dispute because they do not have the same knowledge, expertise or experience.


If the insured asks for an explanation or definition before buying the policy the routine answer will be: “We cannot interpret our policies or answer hypothetical questions concerning cover”. So what message does this send to the buyer? It is not one of comfort or trust.


Clauses that make a notification of a claim a condition precedent to liability are disingenuous, unnecessary and highly damaging to the reputation of the insurance community. Insurers have every knowledge, skill and resource at their fingertips while the insured, on the other hand, is at a complete disadvantage unless they engage specialists to argue their case on their behalf, and why should they have to?


Key facts conundrum Key facts have been introduced to bring to the proposer’s attention the extent of cover of the policy they are considering buying. In fact it can reasonably argued that a Key Facts document is, by definition, a mis-leading statement by insurers to the proposer/ insured. It contains only what the insurer determines are Key Facts and these do not go so far as to explain how the rest of the policy works or may be interpreted.


If, subsequently, a claim is turned down by reason of the interpretation of a word, expression or phrase in a policy that was not referred to in the Key Facts document


Insurance Brokers’ Monthly July/August 2010


it undoubtedly becomes a Key Fact to the insured at that time if it could not reasonably have been recognised for what it is at the time of buying the insurance.


Is it fair to issue an insurance policy containing words, phrases and expressions which mean everything to one side of the bargain and nothing to the other?


It is all very well saying that the insured has an opportunity to ask questions about things that they do not understand in a policy wording. The point is that they do not know what they do not understand until it is too late.


Some insurers have endeavoured to go for plain English and many of these have succeeded very well but there are plenty of others that have not and are far from it. Fairness is at the root of insurance professionalism where the basis of an insurance contract is “Utmost Good Faith”. This expression is still the underlying doctrine behind insurance and it is one phrase (along with an Act of God) in insurance that many people do know and believe they understand from the ordinary meaning of the words.


Fairness with the insured must be urgently addressed by the insurance community if there is to be any chance of insurance being regarded as a profession.


Complaining is hard work The general approach of insurers to criticism is there are thousands of claims that are paid without any problem. It has been said that people should complain to insurers and not the press. Have you ever tried? There are innumerable barriers to overcome in making contact with an insurer unless it is a formal complaint - where the FSA regulations requires a name and address to be in the policy.


Is there a case for the insured to be able to discuss their concern with the insurer without having to make a formal complaint? The answer might well be “no, there is no case for this because the complaints procedure is perfectly good enough and the cost of entertaining anything more would be prohibitive”.


So, is the broker providing a professional service or selling a commodity? There are three reasons why the answer is a professional service:


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