Insurance industry facing government survey of rates

| 06/04/2010

Cayman Islands News, Grand Cayman Island Business news, Cayman property insurance(CNS): The high rate of insurance coverage came under the spotlight in the Legislative Assembly during the last meeting when a private member’s motion gained backing from government to investigate current rates and examine the possibility of making them more affordable. Following Hurricane Ivan in September 2004 insurance rates increased significantly — not just because of the risk but because of the cost of rebuilding at that time and the concept of ‘under insurance’. But while property prices have fallen since then as well the cost of building materials, there has been no marked reduction in insurance premiums.

The independent member for North Side, Ezzard Miller, who filed the motion, said people could no longer afford insurance so were going without, which posed a considerable risk for the future. He suggested that the Economics and Statistics Office conduct a study comparing insurance rates throughout the Caribbean region with countries that also have similar risk exposure to hurricanes, as he said insurance rates were currently linked to inflated property prices and reflected a higher cost to re-build than the reality.
Miller said that insurance rates were simply too high, pricing many people out of the market and leaving them exposed to losing their homes. The independent member said these premiums were high as a result of the idea of “under insurance”, which emerged after Ivan, but he added that since then property prices and building material costs had come down and that the rates were now unrealistic.
“The value of real estate is believed by some persons to be inflated,” he told the Legislative Assembly, asking government to conduct the study by the second meeting of the 2010/2011fiscal year to try and address the problem.
The premier agreed that there were problems with insurance rates, and while he appreciated the complexities of insurance coverage and its links to the worldwide re-insurance market, he suggested it would be possible to ring fence the Cayman Islands in some way to make insurance more affordable.
McKeeva Bush said that, given the vulnerability of the Cayman Islands to hurricanes, people needed to be covered. In the wake of Ivan’s devastation, Bush noted that the country’s recovery had been heavily dependent on the insurance payouts that allowed people to rebuild and renovate, stimulating the economy.
“But the rates are so high now people are not insuring,” he observed. Bush recognised that some people had stopped paying premiums because, after paying all of their lives, they made one claim after Ivan to discover they were “under insured”. He said that while there were good insurances companies in Cayman there were also some who “left a lot to be desired” and noted that the insurers had collected their premiums year after year but had never mentioned “under insured” until they had to pay out.
“It is important that people are properly insured,” Bush stated. “The government is concerned about this and we support the request.” The premier said a survey or review of the situation would help develop a strategy about how the problem could be dealt with and a system of more affordable coverage found.
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  1. Anonymous says:

    Forget price controls.

    They have never worked in history and can never work.

    We do not need to waste money by hiring anyone, private or public, to sit around and try to second guess what private companies can charge.

    If they guess too low, there will be shortages, if they guess too high, there will be surpluses.

    And if they guess just right, there is no reason to hire the guesser.

    The only answer is to open up the competition, eliminate strangling regulations, and prevent collusion.


    • Anonymous says:

      Who said anything about "price controls".  It would just be desirable for residents here to have out insurance rates in line with the rest of the Caribbean which are far far less than here.

  2. Anonymous says:

    About time, however what will come of all of this – a big nothing.

    This is a country of cartels, banking, insurance, real estate, legal, accounting, shipping and retail – when is a politican going to introduce anti-trust laws to prevent competitors discussing and setting rates between each other. Look at Cireba a blatant in your face cartel setting rates, colluding together and stifling all free market healthy competiion. All these industries are effectively creating their own monopolies at the expense of the Cayman people and all other who do business here.

    There are no insurance companies in Cayman, they are just brokers who place exorbidant markup and profit on insurance costs. It is another cartel like the banks that sets the rates together and rip off the Caymanian people. Just look at the spread in the banking interest rates ie 0% on your money and 9% for their money. No where in the world is there this size of spread in the rates.

    Just call around the insurance industry and see for your self how close all their rates are in this industry. They are making huge markups for just being a middleman. Allow other foreign insurance brokers to sell insurance in Cayman and break this cartel. Why can a US New York insurance broker mark up the insurance placement only 10% and provide insurance at almost 60% of the cost that a Cayman broker provides the same coverage. There is something wrong here when you add up all the household cost each year and insurance tops the list by far for all costs related with living in Cayman. This includes food, power, maintenance, water, the car, clothes, education, the kids etc etc etc.

    It is for this reason that people have had no choice but to drop their hurricane insurance because of the cost.

    Start the review of this industry by auditing them and seeing how much they are marking up the cost of coverage. Then introduce regulation with new laws to break up all these cartels with stiff penalties and jail terms for executives who break new laws to stop collusion and the setting of rates and charges.

    Isn’t a capitalist democratic system about free markets, free trade with fair and healthycompetition.

    • Anonymous says:

      The biggest ripoffsare the shipping companies.

      Imagine the cost to ship a 20′ container from Cayman to Miami is 3 times what it cost to ship that same container from Miamito China.

      Deal with that and give the Cayman population a break on the Cost of Living.

  3. M.O.G. says:

    If prices are too high, then high barriers to entry into the local market prevent the market responding.  So the hurdles of getting staff and the costs of setting up a new business in Cayman are probably adding at least 10-15% to all of your insurance payments.

    PS: One more big storm in the next 10 years are there will be no insurance available in the Cayman market since the re market will probably not touch the place.  This fact alone puts off many potential buyers.

  4. Anonymous says:

    It’s a nice idea, but the article shows a complete lack of understanding as to how insurance works (& how much to insure for), which is why people are upset when it doesn’t work how they want it to.

    Prices are coming down. "Average" applies where people don’t insure their values properly & is nothing new.

    Yes, insurance in Cayman isn’t cheap, but it is the #1 spot for Hurricanes (see as one example), & insurance companies aren’t charities & need to recoup the millions & billions that they pay out in claims each year throughout the World, or they would go bust. They have to make a profit for shareholders & pay wages too! Surely you understand simple economics, if not insurance!

    Like all products & services, people want to get as much as they can, but don’t want to pay for them. If you cut corners & buy cheapest, then you can expect less than the best; same as with restaurants, builders, cars, etc.

  5. Bert says:

    I agree they are a scam, they always end up winning even if they pay out guess what they will get it back by increasing your Premium the next year, this tactic is done with Car Insurance as well..I have not made any claims but Pre Ivan my Premium was around $2000.00 now its $5500.00 every year I cringe whenever its due!

  6. Anonymous says:

    Yes, Insurance companies are ripping off people and a lot of them follow the policy to deny a claim, once, twice, even three times in the hope that customer gives up and pays out of their own pockets.

    What I do not like is the statement made by the Premier that the Island has been heavily dependent on the payouts of the Insurance companies. Whilst this is true, I think it is also important for each and everyone to prevent hurricane damage as much as possible and to ensure that Contractors built homes accordingly and don’t take shortcuts. Will there be any regulation to that effect? As long as people can get away with building or adding on illegaly, how can you monitor this?

    For each homeowner, they should probably opt to buy hurricane shutters instead of parking a brand new SUV or boat on their drive way.

  7. Anonymous says:

    This is a very interesting article.  It would be intersting to see just how the Premier, will get insurers to reduce their rates in the Cayman Islands.  Let us take a quick look at the issue at hand.  Rates are generated by insurers, based on their availability of coverages from re-insurers.  If their re-insurers are not able to provide them with the desired rates, they would not be able to pass this on to consumers, as they would be fighting a loosing battle.

    Just like the insured/consumer, Insurers depend on their insurers, (known to the public as reinsurers) to provide for them the basic essence of what insurance is all about, and that is peace of mind.  Without this peace of mind, they would not be able to offer this intangible service to consumers.

    It is a good idea for the Premier to look into, and I wish him all the luck possible, as who he will really need to speak to are the reinsurers (eg. Swiss Re, Aon, just to name a few).  The region on a whole is experiencing a softening of rates at this time, but Cayman is being looked at in a different light.  So all the best Sir, and let us see how this will turn out.

    It should be noted that "Under Insurance/Average Clause Condition" did not materialise as a result of Hurrincane Ivan, it has been around for years.  If any prudent person should wish to go back and pick up their initial policy, they will find the sections in their policy, which relates to under insurance.  If you are not sure, ask questions.

    Consumers, please note that you must be aware of what you are buying.  So when you go into an insurance company to take out coverage on your property, please ensure that you ask about all the pros and cons that are attached to your policy.

    Oneof the other things I remember people where saying and are still saying todate, is that they were not aware of a deductible on their policy.  Again, I ask people, never to buy into something that you are not sure of.  Questions were made to ask, if you do not ask them, your insurer or broker, could think that you aware of what you are getting.  But please note, that even when you are some what aware, ensure that you ask all the questions, even when you think that they may be silly.  Ask, and let them provide you with an answer.  What this allows you to do, is cast the blame in the right direction, should an incident occur, to which the advise provided, is not in keeping with your settlement.

    • Anonymous says:

      You are not honestly telling me the insurance companies are ONLY passing on the reinsurance rates and not padding them out in spectatular fashion?

      Oh please. Pull the other one.

    • Anonymous says:

      "It is a good idea for the Premier to look into, and I wish him all the luck possible, as who he will really need to speak to are the reinsurers (eg. Swiss Re, Aon, just to name a few).  The region on a whole is experiencing a softening of rates at this time, but Cayman is being looked at in a different light". 

      Insurers everywhere depend upon reinsurers but not all countries have as  high rates as we have here. The bottom line is they feel we can afford it and they can get away with it.

    • Anonymous says:

      You sound like you work for an insurance company by defending them.  Just answer why the insurance on my house worth $900,000 costs me at LEAST twice as much to insure than the same house in Jamaica or elsewhere in the Caribbean.  

  8. Anonymous says:

    Finally – someone has come out and stated the obvious. Our rates tripled post Ivan.We need to have a survey and someone needs to force these costs down. Amen brother

  9. Anonymous says:

    Not before time!

    I am sick to death of having to pay ridiculous insurance rates.

    I pay 800 CI a month because I have a mortgage and the bank tells me thats its mandatory.

    Maybe the Government should have it’s own insurance company (a bit like credit union).

    • Confucious says:

      Oh yes great: the Government have its own insurance company! Are you mad? Government cannot even run Government let alone the credit union.

  10. Anonymous says:

    Well it is a well known fact once prices go up, even for am exceptional event such as Ivan, once they go up – they never seem to go down again.

    They need to come down 30-50% pretty much immediately.

  11. Anonymous says:

    waste of time again by Ezzard…. the insurance premiums have come down over the years and the market is competitive….if you think we are getting ripped off locally try get some quotes from overseas firms like Llyods of London….

  12. Anonymous says:

    insurance companies are the BIGGEST SCAM !

    You pay your monthly/annual fees and do what you are required to do…then when you make a claim they refuse to pay out or pay out a much lower amount than they should.

    SCAM !

  13. Anonymous says:

    Here is an excellent article published only yesterday into the decline in the standard of the insurance companies, who increasingly are putting profits above the promises.

    Quote from the article: "

    To improve their profits, companies delay payment of justified claims, deny payment altogether, and defend their actions by forcing claimants to sue to get what they are entitled to."

    Sound familiar?..think of a big hotel in GC which is still in ruins because of the insurance company.

    No wonder people are turning their backs on insurance companies when they intentionally fail to deliver the securitiy they are paid to deliver.


  14. Anonymous says:

    About damn time!!!

    • Anonymous says:

      Banks make it mandatory to have Life Insurance and also Property Insurance once you have a morgage with them. The rates are too high and the average person cant afford to pay the premiums. Iwish that it would be mandatory for the Banks to pay these premiums and include it in the morgage. Also Government should look at what a certain large Insurance company have done. A Universal Policy was sold to me at a certain premium and was told that it was a fixed premium if you paid more than the premium that the difference would go to the Investment. After paying this for a few years Ireceived a letter stating that the premium had increased by three times the amount, but that I  ALSO HAD THE OPTION OF PAYING THE SAME PREMIUM AND HAVING THE COVERAGE DECREASED. This is sad as I bought that amount to cover my morgage. If this company have underpriced their product to suit todays expenses then they should stand the loss of what they sold and sell to their new customers this high and rediculous price. I would like to know what the monetary Authority is doing about this as I UNDERSTAND THAT THEY ARE AWARE OF THIS. These companys can afford to do whatever they want to as nothing is done to them. In fact they now a days have all sort of Agents representing their companys that sell only to make the commission.