Insurance Code of Conduct for BVI domestic insurers, insurance intermediaries, and loss adjusters to take effect July 6, 2021
The BVI Financial Services Commission recently announced the issuance of the Regulatory (Insurance Code of Conduct) Code, 2021 (Insurance Conduct Code) and the Regulatory (Amendment) Code, 2021 (Amendment Code) both of which come into force on July 6, 2021.
The Insurance Conduct Code
The Insurance Conduct Code introduces a framework to govern the market conduct of domestic insurers, insurance intermediaries, and loss adjusters. It lays out requirements for market conduct, including general conduct principles and specific rules for insurers, insurance intermediaries, and loss adjusters accordingly.
The powerful hurricanes of 2017, which caused significant damage throughout the British Virgin Islands, resulted in thousands of insurance claims throughout the Territory. Although most claims have now been settled, many consumers believe that insurers, insurance intermediaries, and loss adjusters had the upper hand throughout the process. With the new Insurance Conduct Code complementing the Insurance Act, it is envisaged that both consumers and the insurance sector will have better guidance on how to operate before and after a claim is made.
The objective of the Insurance Conduct Code is to ensure that insurers, insurance intermediaries, and loss adjusters take all reasonable steps to protect customers and to ensure fair treatment in accordance with section 71(1) of the Insurance Act.
Accordingly, the Insurance Conduct Code is intended to:
- strengthen public trust and customer confidence in the Virgin Islands’ insurance market;
- protect policyholders and promote fair customer outcomes;
- increase transparency within the insurance sector, so as to enhance customers’ understanding of what they can reasonably expect from insurers, insurance intermediaries, and loss adjusters; and
- support a sound and resilient insurance sector which allows for competition, whilst maintaining business practices that support the fair treatment of customers.
The Insurance Conduct Code addresses various matters as it relates to insurers, insurance intermediaries, and loss adjusters including requirements for:
- Honesty, integrity, transparency, and good faith
- Appropriate presentation of facts and details
- Fair advertisements and promotions
- Professional competence of staff
- Confidentiality and appropriate use of information
- Prompt and fair processing of claims
- Prompt consideration of customer complaints
- Proper management of conflict of interest situations
- Appropriate policy servicing in accordance with agreed terms
- Appropriate engagement by insurers with intermediaries
- Appropriate engagement by insurers with loss adjusters
With respect to the requirement for honesty, integrity, transparency and good faith, Section 5 of the Insurance Conduct Code provides that an insurer, insurance intermediary, or loss adjuster shall operate its business with integrity and in good faith. In doing so, an insurer, insurance intermediary, or loss adjuster shall:
- never provide customers with false or misleading information or misrepresent the coverage being provided or intended to be provided under an insurance policy;
- ensure that its employees meet high standards of competency, ethics, and integrity;
- conduct its business in such a way as to treat customers fairly and ethically, commencing before the inception of the contract and through the point at which all obligations have been satisfied; and
- ensure that actions relating to any insurance transaction consider the interest of customers.
Additionally, Part III of the Insurance Conduct Code specifically provides rules of market conduct for loss adjusters. This is noteworthy since generally after a claim, they take front stage in the process. The following should be noted in relation to loss adjusters:
- Where a loss adjuster is acting on behalf of an insurer and interacts directly with a claimant, the loss adjuster shall notify the claimant that it is acting on behalf of the insurer and provide an explanation of its role in investigating and settling the claim.
- Where a loss adjuster is acting on behalf of a claimant, it shall, prior to acting on behalf of a claimant, provide the claimant with sufficient explanation to understand the process of investigating and negotiating the settlement of the claim, the services being rendered by the loss adjuster and the proposed fees associated with providing such services.
- A loss adjuster shall not make any representations to its clients or claimants that are false, misleading, or likely to be misleading.
The Amendment Code
The Amendment Code imposes specific requirements on claims handling records that licensed insurers and insurance intermediaries must maintain. In addition, the Amendment Code substitutes Section 59 (2)(a) of the Regulatory Code, 2009 to outline the auditing standards by which ‘licensees’ financial statements must be audited. The auditing standards are as follows:
- US Generally Accepted Auditing Standards;
- International Standards on Auditing (UK);
- International Standards on Auditing;
- Hong Kong Standards on Auditing;
- Canadian Auditing Standards; or
- such other recognised international auditing standards as may be approved by the Commission on a case-by-case basis.
Relevant licensees should implement appropriate measures to ensure compliance with the Insurance Conduct Code and the Amendment Code requirements, which can be found on the Commission’s website. Consumers are also encouraged, in particular, to read the BVI’s Insurance Conduct Code so that they can become familiar with their rights thereunder.