Brace for increase in insurance premiums says IAJ
The Insurance Association of Jamaica (IAJ) is advising Jamaicans to brace for an increase in premium come January next based on COVID-19 and other market conditions.
Responding to questions from The Jamaica Observer's Sunday Finance, IAJ vice-president Mark Thompson explained that a review in premium rates has become necessary because of COVID-19 and its effects added to the demands for higher premiums by reinsurers.
The demand for higher premiums by reinsurers stem from the fact that over the last three years insurance companies have been paying out more, particularly for claims arising from flood and hurricane damage in the Caribbean and the United States.
These payouts, Thompson explained, are way beyond the usual thereby compressing the cash flow position of insurance companies, resulting in a need to increase premiums. As it regards reinsurance, Thompson declared that “in the coming season we believe that it is going to be more difficult for the general insurance market to get their coverage and even with that coverage, it's going to be at much higher rates, so there is going to be the need for the rates to be increased.”
Asked about the time frame for increased premium rates, Thompson, who heads Advantage General Insurance Company, noted that rates are usually determined in January and implemented one to two months later.
Speaking at last Friday's (June 26) IAJ presidential handing-over ceremony at the Pegasus hotel, Thompson was quick to point out that a crucial determinant of the premium rates in any given year is the experience of the past hurricane season, which starts in June and ends in November each year.
“When we went through the last major hurricane cycle a few years ago, the reinsurers were asking for 40 per cent to 50 per cent increase in rates; their view point is that the rates are significantly lower than it should be so that's the reality we have to bear through,” Thompson said.
Incoming IAJ president, Vernon James, concurred with Thompson that rates will be going up next year based in part on the pressure of reinsurers to up their rates.
“We have an expectation that there will be some adjustment which they have started to indicate but we will continue to resist…we will see how best we can limit this impact (higher reinsurance rates),” James explained.
He made the point that making insurance expensive is not consistent with the drive of the IAJ to increase insurance take up in Jamaica.
James posited that COVID-19 is a reminder of the risks we have to live everyday with some many negative things that can happen to us without warning. He said the association continues to be concerned as an industry about the low penetration of all forms in Jamaica.
As Jamaica prepares to navigate the hurricane season, it is estimated that just over 20 per cent of homes in Jamaica are insured with James pointing out that most of these homes are only insured because it is a condition for a mortgage. The IAJ president, who is also CEO of NCB Insurance, declared, “it is also a matter of great concern that only 10 per cent of the Jamaican workforce are members of a registered pension scheme.
James argued that Jamaica is underinsured as it regards health insurance with about only one third of the workforce and just over a quarter of the population having health insurance. With respect to individual life coverage, there was an uptick last year and now just over 30 per cent of individuals have life coverage.
With regard to motor insurance, it is estimated that 70-75 per cent of motorists have coverage.