Archive for April 6th, 2010
Insurance industry facing government survey of rates
(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.