BCIC Creates ‘No Fault Discount’ In First For Motor Market

British Caribbean Insurance Company (BCIC) has introduced a ‘no fault discount’ for policyholders involved in accidents that are provably not their fault.

It replaces the ‘no claims discount’ that the company offered on policies covering privately owned vehicles. But BCIC managing director, Peter Levy, says the new discount will be offered at the same rates.

“It increases each year to a maximum of 60 per cent in the fifth year,” Levy said. And like its predecessor the no fault discount will be applied against the annual premium at policy renewal.

BCIC is touting the no fault discount as a potential game changer for Jamaica in an insurance market that typically penalises a policyholder with higher premiums if they file accident claims, whether or not they caused the smash.

It is also the perception that the penalty coupled with the reward for ‘no claims’ serve to dissuade motorists from reporting accidents.

The issue comes up intermittently in industry forums but it has always been left to individual insurers to devise their own solutions, the Insurance Association of Jamaica said Thursday.

The new BCIC ‘no-fault’ policy benefit took effect on June 1.

For comprehensive policies, said Levy, it works like this:

• After one year without an at-fault claim, the policyholder gets a 10 per cent discount at policy renewal;

• After two years, the discount is 20 per cent;

• After three years, it’s 40 per cent; and

• After four or more years, the discount is 60 per cent.

The Third Party scale is different but works similarly, he added.

“Persons who were not at fault, but whose claim against the third party fails for some reason – for example, the third party driver was not authorised to drive, or a hit and run where the third party is not known – will face an increase in premium purely through bad luck,” said Levy.

“With the no fault discount, BCIC looks at the actual circumstances of the accident, and if the customer was not at fault, he or she will maintain their discount status. Even if there is no recovery from a third party, if the customer was not at fault they will keep their discount,” he said.

BCIC is the first in the insurance market to introduce a no fault discount and was developed following customer complaints about the “unfairness” of the no claims discount.

Levy was not prepared to discuss the expected underwriting impact nor the projected premiums that the company expects to forego. He acknowledged that the new discount could result in more motor accident claims, but was also expectant that the market would recognise it as “a revolutionary improvement”, and that the product would be attractive to discerning insurance buyers – in essence, the added risk would be offset by new or additional business.

“Some customers would previously have decided not to claim because to do so would cost them more in premium at their next renewal, and we are now more likely to receive a claim. We expect that this will increase our total annual claims cost,” said the BCIC boss. “In addition, some customers who would have lost their discount under the NCD will now retain their discount, and so we will lose revenue as well.”

On the other hand: “We at BCIC believe that we have created a better product, especially for careful drivers, and we think this makes us a more attractive option for those customers,” he said.

BCIC is now the fourth largest general insurer of nine companies, the top three being Advantage General, Guardian General and General Accident, respectively. It is owned 68.5 per cent by ICD Group Limited and 31.5 per cent by Victoria Mutual Building Society. The company grossed $4.8 billion of

premiums last year, up from $3.8 billion, tripled its underwriting profit and grew net profit by 11 per cent to $381 million.

Motor vehicle insurance represents 42 per cent of BCIC’s business and 70 per cent of gross claims, said Garth Rowe, the company’s general manager of finance.