BY JULIAN RICHARDSON Assistant business co-ordinator email@example.com
Wednesday, June 01, 2011
THE fear of natural disasters and the consequent loss of property is not pushing Jamaicans to buy more property insurance policies, industry statistics reveal.
In fact, the most updated first half figures released by the Insurance Association of Jamaica (IAJ) last year show a marginal decline in homeowners' gross written premiums across the industry — from $1.08 billion over January to June 2009, to $1.07 billion over the comparative period in 2010.
NEM Insurance boss Chris Hind believes that affordability is a big factor contributing to the disappointing trend.
"I agree that there has been no 'flood' of new premium to insure property," Hind told the Business Observer yesterday.
"I think that spend in this area is constrained by the general economic conditions which restrict disposable incomes," he noted.
The development is disturbing as it comes against the background of a forecast for an above-average 2011 hurricane season, which begins today. Some six to 10 hurricanes are expected this year, with three to six classified as major hurricanes, according to estimates by the US-based National Oceanic and Atmospheric Administration and other forecasting groups.
Additionally, the forecast of an above-average hurricane season is on the heels of numerous natural disasters across the world which have cost billions of US dollars in damage and pushed people in other parts of the globe to buy more property insurance policies.
"Unfortunately, many property owners (in Jamaica) would still see spending on insurance as discretionary in spite of the terrible images we have seen from Haiti, Japan and most recently Joplin," noted Hind.
"There is still a prevailing feeling that if it might happen, it also might not!" he added.
In addition to affordability, Jamaica International Insurance Company (JIIC) managing director Andrew Levy opined that the perceived seldomness of major disasters and high construction standards play a part in the weak appetite for property insurance among locals.
"Theoretically, we know that we are exposed to hurricanes, but it's something that we don't focus on … because most people experience it once or twice in their adult years," said Levy.
Added the JIIC head: "Also, the construction standard in Jamaica is quite high so what may be damaged (in a storm) is a roof or part of a roof and not the entire house like a tornado would (abroad)…So they use the money to build the house, for school fees, etc and there is not a lot left over."
But, like in the US where many of the homes destroyed by deadly tornadoes recently were uninsured, local industry players are on a drive to educate locals about the importance of homeowners' insurance.
"It is up to us in the industry to keep customers and potential customers informed so that they can best understand the risks they face and how we can help them to protect themselves," said Hind.
NEM has seen "measured but encouraging growth" in its property portfolio as customers have absorbed its earthquake awareness messages in particular, said Hind.
According to Levy, preminim income on property insurance has performed flatly so far this year compared to last year.
IAJ statistics reveal that JIIC is the third largest player locally in terms of gross written premiums on property insurance, with roughly 10 per cent of the value of the market. American Home Assurance Company dominates that segment of the industry with almost 50 per cent market share, followed by British Caribbean Insurance Company Limited with 12 per cent of the market.
Levy, who is a former president of the IAJ, said that the industry is very prepared for the active hurricane season that has been forecast.
"I think on a number of levels, the Jamaican insurance industry is well prepared… and this is one of the times when the industry proves its worth to the country," said Levy.
"All of us will have catastrophy contingency plans and the Financial Services Commission is doing a good job in making sure that the insurance companies' reinsurance protection are in place with credible, well highly rated reinsurers."