Opinion: Local Insurances in stranglehold by banks

POSTED: 09/17/11 3:17 PM

Last time we checked, we realized that we did not know anybody who likes insurances – except of course the companies that are selling policies. Most people don’t want to be bothered with the finer points of insurance-related issues, even though deep down they know that they should. In 1995, after Luis hit St. Maarten, people woke up to the insurance-issue. All in all insurers paid out something like 800 million guilders for damages to insured property. Whether that was the correct amount, or if it should actually have been half, double, or triple that amount is up for debate – and by now of course it’s water under the bridge.

In August the Central Committee of parliament held an information session about the local insurance industry. The attendance record shows that parliamentarians are not too interested in the subject either: just 60 percent or nine out of fifteen MPs showed up for the meeting.

But okay, nine is better than none, and these MPs ought to be ready to handle, as they love to say, “the business of the people.” Well, insurance certainly does concern citizens, even those who are currently uninsured.

One of the tantalizing subjects in the meeting was the position of insurance brokers versus the dominant position of commercial banks. The brokers have been pointing out for years that the banks have a stranglehold on the insurance business by linking loans and insurance in a way that leaves customers little to no choice.

We have a copy of a loan contract, issued to a government foundation that says literally in the last paragraph: “(bank name) shall have brokerage over all insurances regarding this facility to be covered by (name insurance company).”

Another loan agreement contract from one of our commercial banks stipulates: “You will lead all your banking transactions and insurances through our bank.”

The brokers are not happy with this situation, but the ones who ought to be truly unhappy are the people who are forced to take out insurance this way.

While there seems to be little difference between taking out insurance via a bank, a broker, or directly from the insurance company, the potential negative consequences for clients are close to unimaginable. So to all those who are about to contract a loan that requires accompanying insurance, please bear with us. This is important and this could save you thousands of dollars.

Maybe this example will convince readers. We saw details of a real case whereby the insured party claimed damages caused by a landslide. No cigar, the insurer said, that landslide was the result of excavation activities. The insured party finally took his case to an insurance broker, who managed to get an advance payment of $10,000 within a week. Six weeks later, the damages were settled for the grand total of $30,000.

The difference: insurance brokers are by law required to stand up for the rights of their clients.

Banks have a different position. They could be the financer (by issuing the loan), the insurance advisor, the insurance company and the party that appoints the claim assessor.

Banks that are also insurance companies benefit directly from the policies they sell. They also have a vested interest in keeping pay-outs to the strict minimum.

The infamous small print in insurance policies befuddles about 200 percent of all clients and when they get to hear something like, sorry, but your policy does not cover this, they go home an illusion poorer and a bad experience richer.

Insurance brokers are familiar with all the small prints and they function as the intermediary between clients and insurers.

These are all valid reasons for a critical look at the role banks play in the insurance industry. Among the parliamentarians who attended the August 11 Central Committee meeting there was one – Johan Leonard – who said that the United People’s party is “looking into ways and means” to deal with the banks.

We are always curious to know what expressions like looking into ways and means actually mean. Does it mean that the esteemed MP is going to do something? It is possible of course, but since that meeting on August 11, a lot of things have happened. The first parliamentary year officially closed; the new parliamentary year officially opened; tropical storm Maria breezed past the island without causing anything; and on and on. But MP Leonard did not utter a word in public about his contacts with parliamentarians in Aruba who are apparently working on legislation to regulate the insurance business. He did not make any public announcement about the looking-into-ways-and-means exercise either.

So we gather that, since there have not been any public announcements, that nothing has happened, and that the matter of sorting out the way banks deal with insurances has been conveniently forgotten.
What have voters got to say about this? Nothing, of course, because their first opportunity to tell their MPs to get on with their job come during the elections in 2015. That’s a long way away. It also gives voters ample time to think about how their elected officials are handling “the business of the people.”

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