Prelude
The Bahamas is being forced to amend the liability provisions in the Road Traffic Act to eliminate unlimited liability for road traffic accidents, because international re-insurers have threatened to withdraw their coverage at the end of this month (January). This would seriously affect thousands of Bahamian motorists possibly leaving them in peril. Mr. Robin Hardy and Mr. Tim Ingraham of the Bahamas General Insurance Association recently discussed possible solutions to this problem and other related matters pertaining to Automobile and Road Traffic Act Insurance, with Mike Smith on ﾓContactﾔ on Love 97.
Mike Smith: The Government is expected to amend the Road Traffic Act to limit liability. Do you expect that it will be done in time, and will that solve the problem that I understand is a major one for the insurance industry?
Tim Ingraham: According to the minister responsible in a speech she gave recently to a function, the government has promised to bring legislation to parliament by the middle of this week and they do anticipate that it will be passed before the end of the month in time to meet the extended deadline, which insurers have negotiated with re-insurers from overseas. So we are very hopeful that this is going to get done, itﾴs been a long road to get here, but it appears there is light at the end of the tunnel.
Mr. Smith: Why is the amendment necessary, and what is the Bill seeking to do?
Robin Hardy: The Bill is seeking to put a cap on the amount of liability insurance that the person has to buy for it to be legal to have that car on the road. Itﾴs not by any means putting a cap on the awards theyﾴve got to make, thatﾴs not the idea at all, itﾴs the limited amount of liability insurance you have to buy to put the car on the road. The limits being discussed at the present time are 2.5 million dollars for an individual and 30 million dollars for an incident.
Mr. Smith: Could you explain the difference?
Mr. Hardy: To have the cover required by the Road Traffic Act is a cover for death or bodily injury, it does not cover property damage, only death or bodily injury. For an individual ﾖ if somebody hit a car in which any of us were passengers, the 2.5 million limit would apply individually to each of us and 30 million would apply to the whole incident for instance they might have hit the car and pushed it in front of a bus and youﾴve got a lot more people hurt. Now the highest award that has been made in The Bahamas so far, I understand, is something between $1.6 and $1.7 million, and that was for somebody who was severely injured, confined to a wheelchair or maybe even worse ﾖ I donﾴt know the details, Iﾴm assuming that they were confined to a wheelchair and they had to have their house modified, probably would require 24 hour services for the rest of their lives and needed the money to keep themselves going. So the 2.5 million for an individual is quite a realistic level.
Mr. Smith: Any idea how that figure ($2.5 million) was arrived at?
Mr. Ingraham: Iﾴm not sure
Mr. Hardy: Neither of us was involved in the negotiation. I suspect it was a case of people looking at what is being awarded and of course deciding well you know, ﾓlets make sure to pick an amount that exceeds what is being awarded so that in the future we do not have to go back and modify the Act again, we will pick a high limit so that once itﾴs in place, we donﾴt need to worry about inflation driving the award made by the court above that limit in the near futureﾔ.
Mr. Smith: Of course motorists in The Bahamas are ﾖ until this is passed ﾖ have unlimited liability. How significant is this change?
Mr. Ingraham: From the point of view of how it will affect the way claims are settled and so on, I donﾴt think that itﾴs going to be very significant at all. Claims are settled based on case law, I have a former claim settlement you add for inflation and all of the rest of the claims like that. So, I donﾴt think that this would have a huge impact on that. Itﾴs something though that had to be done, companies ﾖ especially re-insurance companies ﾖ who are the ones carrying the risks looked at it and said, ﾓlisten you are asking us to guarantee paying an unlimited amount, we are limited companies we only have so much capital, we cannot guarantee you that we can pay an unlimited amount.ﾔ There are accountants reviewing their companies, they are reviewing their balance sheets and need to know what their liabilities are, and when they say that over here we have some unlimited liability, that throws up red flags and its causing them some problems.
Mr. Smith: Why all of a sudden a shift and concern about limited liability, when youﾴve had this luxury ﾖ if you want to say that ﾖ all these years?
Mr. Ingraham: There were couple of accidents recently overseas, which sort of highlighted what kind of problems that can happen. In the U.K you had a train accident ﾖ I will refer to it as the Selby Incident ﾖ which is being settled for 80 million pounds, but of course most of that would have been loss to the railway lines, damage to the engines and equipment etc., not a large portion of that went to the actual bodily injury. The other thing to is that the results of companies are being more scrutinized now, not just re-insurance companies, but companies worldwide too. Directors are asked to give a much more in-depth explanation of what they are doing, and certainly things like this they have to look at. I will also point out that we are not the only people that this is happening to right now. The re-insurers we do business with, do business all around the world, so these changes are being made basically all around the world at different rates of speed obviously, because it may be a bit easier to do it here than in some other jurisdiction.
Mr. Smith: Why did they have this urgent deadline ﾖ the end of January of this year?
Mr. Ingraham: Actually, we have been working on this unlimited issue from about 1990, so things are just coming to a head at this point where for a few years now we have been saying, ﾓlisten, re-insurers are saying to us that this has to be changed and that has to be changed,ﾔ and we have been talking to the government about it and it has gotten to the point where they have said, ﾓwell listen guys you cannot continue to carry this into the future, something has to be done right away.ﾔ
Mr. Hardy: It was actually in November of 2002, when we first wrote to government after we had first been told by the re-insurers that they wouldnﾴt carry it beyond the end of last year. We did write the government again about it, but again, we are assuming those things just got filed without being read, and it was only in August/September in conversation with Mr. Rolle, the Controller at Road Traffic ﾖ I brought it out to him that unless the Act was changed, the insurers would not be able to issue the certificate of insurance required under the Road Traffic Act to get the cars licensed. When he heard that, he came to appreciate what we were saying and I think that since then weﾴve had quite good cooperation from government.
Mr. Smith: What does this mean for the actual consumer, will their premiums be affected in any way?
Mr. Ingraham: We donﾴt expect that there will be a significant change in any premium, certainly in the short term. In the long term it may actually benefit the consumer, but this is something we cannot guarantee. The risk is not as great once you cap the liability, then to a certain extent we are going to expect that some re-insurers who look at us now will say, ﾓwell I donﾴt want to do business because of this unlimited thing,ﾔ may take a different view once they know what the limit is going to be. You know what you stand to lose going in, you might be a little more encouraged to go in rather than if someone is saying that itﾴs unlimited.
By Mike Smith, The Bahama Journal
Contact is aired Mondays at 8:00 p.m. on Love 97. Comments can be e-mailed to mdsmith@coralwave.com.
