The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First believes it has made a “significant” dent in the fraudulent use of insurance ‘cover notes’, having received no Road Traffic Department queries since its new system was launched last September.

Patrick Ward, the property and casualty underwriter’s president, told Tribune Business that the new system had enabled Bahamas First to have “more control” over documents issued to clients while still providing them with instant motor coverage.

“Last year, we implemented a new system of dealing with cover notes because of fraud concerns,” Mr Ward said in a recent interview.

“That has been implemented in a smooth manner, and what we have now is a significant improvement over the position that was in place before.

“We now have more control over the issuance of documentation process. That allows us to provide instantaneous coverage to people that need it, while ensuring that documents are not being produced or used for fraudulent purposes.”

Tribune Business revealed last year that Bahamas First had spent many months talking to its agents/brokers about phasing out ‘cover notes’ due to “a significant increase” in their fraudulent use.

Mr Ward explained then that this was costing both the Bahamian insurance industry and the Government much-needed income, and defrauding many innocent auto buyers.

With many ‘cover notes’ being written-up and issued manually, these were easily reproduced by fraudsters, who simply blocked out the old names and exchanged them with new ones.

This, in turn, enabled unscrupulous vehicle sellers to claim they had insured the auto on the buyer’s behalf - a claim that was totally untrue.

‘Cover notes’ have often issued to show that an auto owner has the required insurance coverage prior to the underwriter issuing the full Certificate of Insurance.

Numerous Bahamian auto insurance customers have become accustomed to visiting their agent/broker in the last few days before they have to take their vehicles through the Road Traffic Department inspection.

They cannot have their vehicles re-licensed without insurance, and typically obtain ‘cover notes’ as proof they have it.

However, Bahamian insurance brokers and agents have, in the past, told Tribune Business that clients often only pay just enough of the premium to obtain insurance coverage - and pass the Road Traffic Department inspection - then fail to pay the balance.

And, also confirmed by Mr Ward, the industry has seen ‘cover notes’ abused by its own employees. They have issued them to family members and friends, without any premium being paid or subsequent Certificate of Insurance issues.

Typically, the premium is only paid and/or policies issued once these same relatives/friends become involved in an auto accident.

Several agents and brokers had previously voiced doubts to Tribune Business about Bahamas First’s plans, but Mr Ward said this week that the new system “has worked very well despite some of the concerns that were expressed”.

Asked by this newspaper whether the move had impacted the ‘insurance fraud’ it was trying to prevent, MR Ward said it had.

“One indication that we do have is that we have not had any reason to question documents presented to Road Traffic since the roll-out of the new platform,” he told Tribune Business.

“That, in itself, is an indication there’s been a drop in fraudulent documents out there. There are always inventive people who come up with new schemes, and our task is to try and keep ahead of them.”

Meanwhile, Mr Ward said the “significantly lower” number of construction projects that were in the pipeline meant Bahamas First was projecting a dip in its engineering and contractor performance bond business.

Bahamas First’s 2013 annual report warned that “growth opportunities will be limited and subject to intense competition” in this category, with “a noticeable decline in new inquiries” from contractors and their clients.

Reaffirming this picture, Mr Ward told Tribune Business: “Right now, in the pipeline, if you look at the number of jobs awaiting approval or have been given approval to go ahead, it’s a significantly lower number than we’d expect to see at this stage.

“It tells you you’re not going to see the same level of Contractors All-Risk Protection. If you talk to the major contractors, a lot of them are talking about the scarcity of major projects.”

Bahamas First’s wholly-owned broker/agent subsidiary, NUA, has also entered into a co-broking agreement with Lampkin & Company after receiving Insurance Commission approval to “transact long-term business”.

Mr Ward said the move was designed to facilitate the cross-selling of insurance products and diversify NUA’s client and revenue base. Lampkin & Company, which specialises in life and health insurance, will be able to refer clients seeking property and casualty coverage to NUA, while the latter will do the same for persons wanting life and health protection.

“It’s again another diversification issues in terms of diversifying revenue streams,” Mr Ward told Tribune Business. “NUA has a significant base of property and casualty clients that have needs relating to the class of business that Lampkin & Company specialises in.

“There’s an opportunity for some cross-selling to consumers that will inure to the benefit of both organisations.

“The relationship at this point is not driven by hard Budget requirements. It’s a symbiotic relationship that’s going to grow organically without having to deliver specific targets at this stage.”

Mr Ward reiterated concerns that the Government’s fiscal reform plans, and specifically Value-Added Tax (VAT), would hurt the insurance industry by leaving consumers with less disposable income.

While Bahamas First had “no specific plans” for further broker and agent acquisitions in the Bahamian market, Mr Ward reaffirmed that there was “no secret” it was still interested in the “right opportunities” for expansion into the English-speaking Caribbean.

“We’re putting a lot of effort and time into making sure we get the efficiencies and productivity gains from the various parts of the organisation that we’ve brought together over the years,” he added. “There are big dividends to doing that.”