Stylizing Protection

Jennifer Faircloth’s article ‘Auto Reforms and Broker Liability’ (Canadian Underwriter, June 2011) is a reminder that a broker’s duty of care is immutable. It cannot be compromised, and the weight of defence, successful or otherwise, will be born of the burden of the broker’s actions – or the lack of them – in the financial protection of the client.

Ontario’s auto reforms do not change the fundamental and historic principle of the broker’s professional obligation, which is to prevent dereliction of duty in the proper and correct administration of a client’s protection. But they do   clearly bring to the surface the dichotomy between insurance prior to the introduction of so-called no-fault insurance, as introduced in 1990, and what insurance stands for today.

Prior to 1990, unless an auto claim had all of the earmarks of being black or white in terms of responsibility, loss assessment for resultant injuries and related costs was largely based on circumstantial evidence and the credibility of an answerable witness. It was also a time when the strength of legal representation allowed the defendant to go into a neutral corner, secure in the knowledge that the arguments in their favour would be hard-fought, even if they were not necessarily overwhelmingly convincing. For whatever reason ‘no-fault’ was considered a better alternative, to my mind, this has resulted in a concession to defeatism.

Broker/Client Discussions Post-No Fault

Enter the broker, cheek by jowl with no-fault. Now, black or white is the determinant in all but the most egregious of accidents, or if constitutionality is questioned. A claim is covered or it isn’t. Check the chart. What was purchased? Was something left out because it was not considered purchase-worthy at the time? Check it again. How about now? Want it added? No? Okay. But let me warn you: I’ll be back in a month and I’ll check again. In fact, if my brain doesn’t get too muddled in the meantime, I’ll check again in three weeks because I really don’t know when you’ll need the other coverages. You may need them next week. Oh, so you think I’m a nuisance?  Well, dear client, that’s my job. It’s what I am expected to do.

Tell you what, dear client: since I am not a soothsayer, a seer or omniscient teller of fate, allow me to make a suggestion. Coverages were taken away from standard accident benefits on Sept. 1, 2010 because of excessive and sometimes dubious claims, resulting in a profit-losing auto insurance product. I think what you should do now is restore the coverage sections you previously had. Some limits will not be the same, however, but the premium spent will be well worth it. That’s my recommendation.

If you have understood what I’ve said, I’d like you to confirm to me in writing. Otherwise, you and I – and not the third party in an accident – may be in hot water. In fact, can you give me two notes? The second one will refute any notion that the first note did not arise out of your own free will and volition, despite my request of you. (Note to me: Get our E&O insurer to seek out the best lawyer available).

The ‘Stylize Protection’ Trap

Over the past 21 years or so during which accident benefits (AB) have morphed into what we have today, AB remained somewhat static in some areas while in others coverages broadened over time. So rather than today’s situation, in which brokers and clients pick and choose coverage to “stylize protection,” there were frequent changes to do just the opposite – to give the insurance-buying public even greater access to broader coverage. Now, because of the actions of a few to debase the system for unjustifiable financial reward, the majority of right-thinking people (who are not the problem) have been left to pick and choose coverages that might not be required today but could be required tomorrow. The disturbing corollary is that to regain what was taken away does very little to enhance their pocketbook. To restore broadest coverage, there can be a premium consideration of upwards of $400 – and in some cases, beyond – with some coverage sections limited by the insured’s financial means.

If we as brokers are to adhere to the “stylize protection” concept, we are walking into a trap. In my considered opinion, a broker would be well advised to counsel the client to buy the fullest protection available under AB. This would follow the acceptable practice of what was sold to the client prior to Sept. 1, 2010. This practice was not condemned, refuted or disclaimed by insurance companies, the Financial Services Commission of Ontario (FSCO), the Insurance Bureau of Canada or other regulatory bodies. If a broker or other industry voice can justify doing otherwise with impunity, I would like to hear about it.

Left to consider is this: it is one thing for an insurance broker to maintain strict adherence to the moral, legal and fiduciary responsibility he or she has to the client in the ordinary, everyday world of long-accepted coverages, wordings and practices. It is quite another for a situation to have been deliberately developed, as in the case of AB reform, that places the broker in a situation from which it is very unlikely he will be unable to successfully extricate himself.

After almost 60 years in this business, I feel as though I am no longer dealing with the science of insurance and the governance of risk but rather with some kind of dreaded thin line of perspicacity and the spin of the lotto wheel that, in either case, could easily disintegrate into disaster. Is that a rousing cheer I hear for an alternative?