The discussion about insurance and insurance companies has been ramped up quite considerably of late, with people now considering what they say is the only alternative, not paying at all. The dissatisfaction stems from not-so-subtle price increases facing home and vehicle owners.
Many are confused about the justification for those increases, citing their spotless record over many years.
While addressing the issue of dangerous driving on the island’s roads, Prime Minister Philip J. Pierre cautioned that a resulting factor of the carelessness would be a price hike in insurance rates.
All of the complainants have the same position. They are adamant that if the punishment for carelessness on the road is a price hike, then so be it, but it must be meted out to the individuals at fault and not those who have traversed our 238 square miles with absolute caution for the last 20 years. A perfect case of “Peter paying for Paul.”
But the situation is not restricted to just motor vehicles. Motorcycles have attracted new rates that are reportedly triple what obtained only a year ago, and while the two-wheel demons do not have the best road reputation it seems abusive to punish thousands for the action of a few. It may also be noteworthy that it is almost impossible to find comprehensive insurance for a motorcycle. Can that be considered discriminatory? The message from motorists is clear, if you are at fault, particularly a repeat offender, then you should feel the pinch, but the opposite must obtain for those who operate with caution. Then we come to homeowners’ insurance.
This one is slightly more complicated, and homeowners require more dialogue on the issues.
A typical EC$1 million home value would likely attract figures around EC$5,000 per annum. Bearing in mind that not all properties appreciate in value, it is expected that the annual premium would fluctuate as the situation demands. That’s the sentiment of at least some homeowners. Why pay more for a property that has not appreciated in value?
Properties must be revalued from time to time to keep in line with the cost of rebuilding the structure in case of a disaster. That is understandable. What is a bit difficult to comprehend is the seemingly accepted industry-wide calculations that homeowners are grappling with.
Here’s an example, unless debunked by an industry professional, that resonates as woefully unfair as far as homeowners are concerned.
If a property is insured for $300,000 and at the time of a loss the property value was $500,000, you will receive only 60% of the loss amount. In simpler terms, a $100,000 loss is reduced to a $60,000 payout less a deductible, usually around $6,000, leaving a final payout of $54,000.
While the industry professional may have an adequate explanation that puts everything in perspective, one has to admit that on the surface it reeks of an abuse that has been festering for decades.
These areas must be urgently addressed, whether through more appropriate policy explanation or reengineering of applicable rates, or both.
If the situation remains the same or gets worse, it must be understood that before too long many will opt not to pay for insurance, if they can, and risk losing what they’ve worked a lifetime to build.
Particularly because of the relevance of addressing this issue, we invite practitioners in the field of insurance to respond and or explain the workings of the insurance industry.