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Gleaner opinion writer, attorney-at-law, former member of parliament, one-time education minister, and Roman Catholic deacon, Rev Ronald G. Thwaites’ piece last Monday inspired today’s article. His varied interests and experiences allow him to share his insights into many areas that the average single-issue person finds challenging to understand or mimic.
A few of the points that he raised were directly connected to some of the things that I wrote about the local insurance industry last month.
Part four of his five-slice essay, ‘Cruelty and Self-Deception’, began with the sub-head, ‘Institutionalised Indifference’. This terminology is usually used in the context of the prison system. It is a deliberate non-compliance on the part of the prison system and its agents, with its own policies and procedures relating to the fair and humane treatment of inmates.
Mr Thwaites framed his recent encounter with a service provider in an unnamed government institution, intentionally or otherwise, as though he were jailed. ‘The system’ created obstacles to prevent a simple transaction from proceeding quickly. Avoiding them, he wrote, would have tested the perseverance (patience) of the biblical prophet Job. This is, he said, the daily experience of most people.
Private sector companies were not given a pass.
“Please do not think I am picking on government services only. The whole nation needs a ‘bath’ (non-traditional medicine in local folklore) when it comes to respecting others (organisations should) find happiness by enabling others. Poor service, he argued, “robs people of money, productivity, and satisfaction … our tendency is to use power to disable rather than to enable, to confuse rather than to clarify,” Mr Thwaites wrote.
Government and private sector institutions, with some exceptions, are mistreating customers.
The non-adoption of tech tools by motor insurers to accelerate the slow claims settlement process over the years that is not in policyholders’ or the public’s interest is an example of mistreatment. This was the theme of my articles. Despite this, regulatory indifference is par for the course.
The unconcern was re-emphasised by Mr Thwaites in the context of his other remarks about the absence of representatives of the regulatory agencies at “the funeral of the SSL corpse”. Further, he likened the official meeting of SSL creditors and claimants on October 25 to a wake. He also implied failure on the part of agencies of state to realise their mission to protect customers of that institution this way: ‘the government agencies which were supposed to regulate financial institutions’.
Lawmakers erred when they approved the regulator’s mission in the Financial Services Commission’s Act 2001. The words in Section 6(1) of the law were imprecise, did not provide clear directions or focus for the commission’s board, executive management or employees or accurately describe its regulatory functions. The law was not drafted solely for lawyers and members of this group. It was also meant to guide citizens. It failed the latter test. Was this one of the reasons why executive management fumbled the ball when the SSL fiasco became public?
The FSC’s functions were described this way: For the purpose of protecting customers of financial services, the commission shall:
(a) supervise and regulate prescribed financial institutions;
(b) promote the adoption of procedures designed to control and manage risk, for use by the management, boards of directors and trustees of such institutions;
(c) promote stability and public confidence in the operations of such institutions;
(d) promote public understanding of the operation of prescribed financial institutions;
(e) promote the modernisation of financial services with a view to the adoption and maintenance of international standards of competence, efficiency, and competitiveness.
What do these words mean to an average consumer of financial services? 2001 marked the first time that the country and non-deposit taking institutions were being introduced to the concept and practice of integrated financial sector supervision and regulation.
The words ‘customer’ and ‘protection’, most surprisingly, appear only once in the preamble and the five functions that comprise the 90 words that constitute Section 6(1) of the FSC Act. This explains why 25 years after the FSC was formed, it is being revamped and forced, partly because of the SSL scandal, to become more consumer friendly.
Former Minister of Finance and the Public Service Dr Nigel Clarke wrote his article, ‘Navigating the Finsac Conundrum’, in last Sunday’s Gleaner, that Jamaica’s banking crisis in the 1990s was “among the most devastating of the modern world’s long history of similar disasters as measured by the cost of intervention … as representing 40 per cent of GDP”. The FSC Act was one of the many policy responses to that crisis. It is therefore surprising that systems, procedures, and processes, played more important regulatory roles than the fair treatment and protection of consumers after thousands of people were ‘Finsac-ed’.
The FSC Act stands in contrast to India’s IRDA Act in relation to mission clarity. The primary role of the Insurance Regulatory and Development Authority of India, IRDAI, is to regulate that nation’s insurance and reinsurance industries. It is a statutory body that was established two years before the FSC, under the Insurance Regulatory and Development Authority Act.
IRDAI’s key functions include:
• Protecting policyholders: Ensuring fair treatment and safeguarding the interests of policyholders.
• Promoting growth: encouraging the orderly growth of the insurance industry;
• Regulating: licensing and regulating insurance companies and intermediaries;
• Transparency: promoting transparency and fairness in financial markets in dealing with insurance;
• Grievance redressal: establishing mechanisms for effective grievance redress; and
• Innovation: encouraging innovation, diversification, and technological advancement in insurance products and services.
Financial sector supervision and regulation has a brief history in Jamaica. State-sponsored supervision of the insurance industry began in the early 1970s. The regulation of the financial services industry started three decades later. During the 50-year period, these organisations have had 10 different leaders. Information was not available about the turnover of FSC board members over the same period.
Research conducted in the United States suggest that longer CEO and board tenures are often associated with better organisational performance. Longer tenures provide more time to members of these two groups to develop, implement, and evaluate the efficacy of their long-range plans.
It is hoped that the FSC version 2.0 will be created under the direction of the policymakers, technocrats at the Bank of Jamaica, and other experts who have learned from past mistakes, that the new entity will place the interests of customers of local financial institutions at the centre of its mission.
To quote the 2024 Nobel laureates for economics, Daron Acemoglu, Simon Johnson, and James A. Robinson, “countries with better institutions … use these factors more efficiently to achieve a greater level of income”.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com
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