By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Thousands of Bahamian motorists yesterday escaped “quite substantial increases” in their insurance premiums, after the legal system’s highest court backed the industry’s current underwriting model.

Tom Duff, Insurance Company of the Bahamas (ICB) general manager, told Tribune Business that “the whole basis on which we underwrite motor insurance” would have completely altered had yesterday’s Privy Council verdict been different.

The UK court, the highest in the Bahamian judicial system, effectively upheld the insurance industry’s current practice of reducing risk exposure via the ‘restricted driver’ clauses contained in most Bahamian auto policies.

For it overturned a Court of Appeal verdict, won by Eric Antonio, blinded in a 2004 accident with a Jitney, which found ICB was liable to pay a $521,943 judgment he obtained against the transportation company and other driver (see other article on Page 1B).

The other driver, Stevan Edgecombe, was not among the 11 Convenient City Transit Services (CCT) employees named as ‘authorised drivers’ on the ICB insurance policy covering the jitney involved in the accident. The insurer thus argued that it was not liable to pay the judgment - a position the Privy Council.

‘Restricted driver’ clauses limit auto insurers’ payout liabilities to accidents, and other incidents, where only the so-called ‘authorised drivers’ - those named on the policy as covered to drive the vehicle - are involved.

Bahamian property and casualty insurers use this device to minimise their risk exposure, and liability for accident payouts.

And, from the consumer perspective, it also helps to keep premiums at an affordable level - especially for good drivers, with no claims or accident history.

Mr Duff admitted to Tribune Business yesterday that had the Privy Council upheld the Court of Appeal decision in Mr Antonio’s favour, it would have created a “huge burden” for both the industry and thousands of motorists.

“We’re very relieved for ICB and for the insurance industry,” Mr Duff said of the verdict. “We were always confident we were going to win this one because we felt we were appealing on solid legal grounds.

“We’re not surprised at the outcome. We expected the judges to fall on the industry’s side. But if we’d lost this one the whole basis on which we underwrite motor insurance would have to change.

“The industry has always relied on the fact that we have the ability to charge a premium based on who the people driving a motor vehicle are,” the ICB general manager added.

“The ordinary driver has been able to enjoy discounted premiums because they’ve willingly agreed to restrict who can drive the vehicle.

“If we’d lost this case, one of the ramifications would have been the industry would not have been able to allow these discounts, as it would have to look at an entirely different way of writing this business.”

Mr Duff said ‘restricted driver’ clauses also helped to make high-risk forms of driving, such as commercial vehicles and jitneys, “acceptable” from the industry’s perspective - and affordable for consumers.

“To suggest that insurance companies would not be able to control their exposure by restricting the drivers would have put a huge burden on the industry,” Mr Duff told Tribune Business, “and caused us to look at different ways of rating risk.

“We’re happy the Law Lords have agreed with our position that we were acting in accordance with the law. This judgment is good news for the industry, and good news for the consumer in regard to being able to enjoy discounted premiums.”

Had the Privy Council not ruled in ICB’s favour, ‘restricted driver’ clauses would have been rendered invalid, increasing the Bahamian auto insurance industry’s risk/loss exposure.

And, because the sector’s risk profile had increased, underwriters would have had little choice but to substantially increase the premiums paid by businesses and individual vehicle owners to compensate.

ICB is the carrier through which BISX-listed J. S. Johnson places much of its general insurance business, and Mr Duff yesterday said it was ‘business as usual’ for the company - and the entire Bahamian insurance industry - when it came to underwriting motor risks.

“It would have made us completely revisit how we underwrite motor business,” Mr Duff reiterated, if the Privy Council had ruled in Mr Antonio’s favour.

“If, as insurers, we’re unable to restrict the drivers, we have to assume that anybody could be driving the vehicle, and not rely on restrictions.

“The only way insurers could underwrite is to apply quite substantial premium increases, as we cannot rely on who’s driving.”

The ICB chief expressed sympathy for Mr Antonio’s predicament, and the hardship that had resulted, suggesting his was a situation that required Government action to resolve.

But, had Mr Antonio won, Mr Duff said: “The downside would have been many ordinary motorists seeing their premiums increase quite substantially.

“You’re helping some people, but on the other hand others would have suffered. We’re glad that hasn’t happened.”