Industry Questions/Comments
[Section 197 of the Insurance Act 2018]
Section 197 of the Act is amended (a) in subsection (1), by deleting the words "showing all policies in respect of which amounts remain unpayable by the insurer for a period of seven years" and substituting the words "showing all policies in respect of which there is unclaimed money"; this seems to imply that we have to publish all policies for which there is unclaimed money, notwithstanding, for how long such monies have been unclaimed, as opposed to the period of 7 years previously stated.
While the process for treating with unclaimed monies (publishing details, paying over to CBTT where necessary, recovery of excess etc.) is clearly articulated in section 197 of the Insurance Act 2018, and the existing definitions of unclaimed money in the current Insurance Act and the new Act (2018) are clear, the general insurance industry finds the proposed amended definition of unclaimed money (via the Insurance Act Amendment Bill 2019) to be vague and hence difficult to apply, particularly when compared to the definition in the current Insurance Act which is very clear and applies only to long term insurance business. For long term insurance business the entire sum insured is generally payable once the loss event has occurred (once all terms and conditions of the policy contract have been met) and based on section 3(1)(a) of the Limitation of Certain Actions Act, insurers have four (4) years to remit the sum insured to the appropriate beneficiary.
However, for general insurance business where the entire sum insured is not automatically paid out if the specified loss occurs (since consideration must first be given to liability and then quantum for damages/losses sustained) the interpretation of legally payable becomes very ambiguous. Below are examples of questions that arise, as a result of the proposed amendment:
- At what point does a claim become legally payable?
- Is it at the point when both claimant and insurer agree on liability and amount?
- Is it contingent on the loss event occurring or notification being made to the insurer or the claim being made and settled?
- If it is contingent on the loss event occurring or notification being made then what would be the basis for the amount to be paid to CBTT after the four (4) year period for remittance if no documents have been submitted by the policyholder nor access given to view the damages/losses because no claim has been made?
- What if the policyholder/insured, who would normally be the primary claimant, is not able to make the claim due to death or long-term illness e.g. coma?
In light of this, it is strongly recommended that there be consultation with the industry to clarify this issue and/or that further amendments be considered to remove the ambiguity of the proposed amended definition either by clearly defining the terms "unclaimed money" and "legally payable" as they relate to life vs general insurance or by clearly outlining the scenarios/circumstances under which this section would apply to general insurance.
The definitions of unclaimed money as they appear in the current Act, the Insurance Act 2018 and the proposed amendment to the 2018 Act are provided below for ease of reference.
Current Act (Section 144)
"unclaimed moneys" means all sums of money which, after the commencement of this Act, become legally payable by a company in respect of policies but in respect of which the time within which proceedings may be taken for their recovery has expired, and includes sums of money payable on the maturity, after the commencement of this Act, of an endowment policy or an endowment insurance policy which are not claimed within seven years after the maturity date of the policy.
New Act (2018) Awaiting Proclamation (Section 197)
"unclaimed money" means all sums of monies which become legally payable by an insurer in respect of policies and are not claimed within seven years after the maturity date of the policy.
Insurance Act Amendment Bill 2019 (Section 61 of the Bill proposes to modify Section 197 (14) of the 2018 Act as follows)
"unclaimed money" means all sums of monies which become legally payable by an insurer in respect of policies and are not claimed within the time which proceedings may be taken for their recovery.
Central Bank of Trinidad and Tobago
1. Section 197 of the IA 2018 requires insurers to publish a statement regarding all monies payable under policies which meet the definition of ‘unclaimed money’ as at the end of the financial year. The statement must be published within forty business days from the end of the financial year.
2. Section 197(14) defines “Unclaimed Money” as all monies which become legally payable by an insurer in respect of policies and are not collected within the time which proceedings may be taken for their recovery, i.e., during the limitation period. Unless a general insurance policy stipulates otherwise, for the purpose of identifying ‘unclaimed monies’, the time within which proceedings may be taken for recovery, should be counted from the date the insured peril occurs, e.g., the date of the motor vehicle accident, medical expenses, fire etc., and not the date the claim was made and accepted by the insured/claimant. As an exception, for liability insurance, time should be counted from the date liability is determined by a court order, arbitration or binding settlement.
3. All amounts which the insurer has determined as to be payable under the policy on which a claim was made but which have not been collected during the period of time before it becomes statute barred are unclaimed money. This includes, for example, recovery of money from third parties/third party insurers in respect of policyholders’ claims (for example subrogation claims received, where the money is due to the policyholders under the policy contract such as an excess under policy contract, loss of use under motor policy etc).
4. If the amount of the claim is determined by an insurer in accordance with its policy and guidelines etc. and based on the information received at the point in time, but the insured/claimant has not come forward to give his/her agreement, then the amount determined by the insurer to be payable still becomes unclaimed money once the limitation period expired. Should the insured/claimant come forward to collect the money, subsequent to the insurer’s submission of unclaimed money to the Central Bank, and if the insurer is satisfied the person is entitled to the money, then the insurer shall request the Central Bank to pay over the money to the insurer, which will then be paid to the claimant.
5. If a claim remains unsettled due to outstanding information from the insured/claimant, then there is no unclaimed money as the amount due cannot yet be determined.
6. Please note that the seven-year period under the old Act was replaced to ensure that no one is left out, as limitation periods can vary based on the application of legal principles and the Limitation of Certain Actions Act in some cases. For example, the four-year limitation period for claims based on an insurance contract can be extended by the Court if the conditions in section 11 of the Limitation of Certain Actions Act are satisfied. Insurers must liaise with their legal team to ensure that amounts have been correctly classified as legally payable and unclaimed money.
7. Lastly, if during the limitation period, an insurer obtains information that monies payable to an insured/claimant cannot be collected because of a legal hindrance, e.g., the insured/claimant is:
(a) mentally ill or in a coma
(b) deceased and no legal personal representative was appointed,
the insurer may consider the feasibility of making an application to pay the monies into the Court and obtain a discharge as permitted under section 196 of the IA 2018.
Unclaimed Money
It is noted that the limitation period is four (4) years, but with exceptions, as listed in the post for liability insurance (point #2), disability (point #6) and legal hindrance (point #7). However, clarification is required on whether the period to be reviewed for unclaimed money as at each insurer’s 2021 financial year end should be claims with date of loss:
1. During the four (4) year period 2017 to 2021, since the Insurance Act 2018 only came into effect from January 1, 2021 only OR
2. Prior to 2017 only, and if so what should be the cut-off date OR
3. From the period under item #1 and extended to include the period under item #2
To illustrate, for a company with a June 30 year end, should the insurer be reviewing claims with date of loss during June 30, 2017 to June 30, 2021 only, prior to June 30, 2017 only or a combination of the two?
Unclaimed Money
The Act defines "unclaimed money" as monies which have become legally payable by an insurer to an insured and are not claimed by the insured within the time which proceedings may be taken for recovery i.e during the limitation period. It is agreed that such time runs from the date of the peril.
Such monies are required to be "legally payable" by the insurer and in CBTT’s response (#2), it is stated that in determining the time within which proceedings must be taken, the time must be counted from the date of the peril and "not the date the insured made the claim and accepted by the insurer.” It seems from this, that acceptance will make the monies "legally payable” by the insurer and fall within the definition “unclaimed money" but the time in which proceedings must be brought remains as the date of the peril.
However, in CBTT’s response (#4) it states that if the insurer determines the amount of the claim to be paid, having followed its policies and guidelines, and based on the information received at the point in time, but the insured has not come forward to give his agreement, then the amount determined by the insurer to be payable still becomes “unclaimed money” once the limitation period expires.
The question is whether under the definition section of “unclaimed monies”, such partisan determination of the quantum of the claim (i.e. without the agreement of the insured) can be considered “legally payable” by the insurer. It seems that what makes it legally payable, and binding is the agreement of the parties (as recognised by CBTT in response (#2) above. In the absence of any definition of the term “legally payable” in the Act, it is difficult to see how such an exercise by the insurer can make the monies legally payable.
A final point is the question of whether section 197 has retrospective effect. In the absence of express provision, it is assumed that it is not retrospective. In General Insurance, policies such as motor and property insurance are effective for one year. In those circumstances, the provisions of section 197 would apply only to those policies in existence when the Act came into force. The views of CBTT on this issue will be welcome as insurers are unsure how far back the exercise to determine “unclaimed monies” must go.
