have been going up across the board. Hurricane insurance for
houses is the most obvious of the recent rate hikes, but coverage
for medical, automotive, life and marine insurance has also seen
substantial price increases.
of Insurance Management spoke about the reasons for these increases.
"Basically, September 11th was the icing on the cake,"
he said. "There have been more tragedies occurring that
affect the insurance industry, for example, floods in the UK
and an earthquake in New York state earlier this year. These
catastrophes were never anticipated. The insurance industry had
no statistics on them and they were not included as part of the
has been spending more money than ever on natural disasters.
"September 11th is the world"s largest insurance claim
ever. There are now 100 billion pounds sterling (about US$ 150
billion) worth of insurance claims being processed in connection
with that event, and these numbers will probably have doubled
by the time it"s all done.
affects not only buildings [insurance] but also obviously aviation.
Because of the
many cars on the ground destroyed, it affects motor insurance.
lives were lost, which affects life and health insurance, also
for the rescue workers who had to breathe in dust and asbestos.
Travel insurance and business interruption claims are involved.
It runs the entire gamut of the insurance business.
of this, in 2002 the reinsurers have reduced the amount of coverage
that they are willing to sell, and they"re charging more
money for the coverage that"s available. ALL classes of
insurance were increased this year, not just homeowners. Some
people are using "selective insurance" to help lower
the premiums. For example, you might insure the building but
not the contents. You should make sure, however, that what you
DO insure is covered adequately."
of Royal and Sun Alliance Insurance (Bahamas) Ltd. explains the
insurance industry in greater depth. When asked about the rate
hikes, she agreed with Robert. "Basically, we blame it on
September 11th," she says. "There is a hierarchy of
insurance," she explains, "customers go to an insurance
agent to buy insurance. Those agents come to me, the insurer,
to obtain that insurance. From me, it goes to the reinsurers.
These are the large global insurance corporations like Lloyds."
The problem with
9/11 is that a lot of these reinsurers got crushed by the financial
scope of the catastrophe. Since the reinsurers are the ultimate
source of insurance, this has led to a decrease in market availability
of insurance and the laws of supply and demand kick in. There
is a smaller supply of insurance, and at the same time there
is a greater demand. "More people are wanting to take out
insurance who didn"t bother with it before," said Mrs.
Albury. "Because there is an increased demand and less of
a supply to meet it, prices are going up.
insurers] do not reinsure 100 percent of the business we get.
We keep some for ourselves. In general, we only reinsure for
large things, like large fires or hurricanes, etc. that would
be classed as "catastrophes." For an individual house
fire, for example, we would handle that on a local level. "Sun
Alliances rates went up after Hurricane Floyd. There were aspects
of the business that were not being treated properly. For example,
houses in White Sound were insured under the same rates as harbourside
houses in Marsh Harbour. Sun Alliance was tried and tested in
Hurricane Floyd; we paid out more that $50 million.
Our rates went
up directly after Floyd, but other insurance agencies did not.
These agencies have now raised their rates subsequent to 9/11
to a level that is basically in line with ours. The problem is
that the people who are upset about this are those who had these
lower rates for two years and are now seeing rate increases of
up to 50 percent. It looks like a mistake on the invoice! Insurance
agents need to take the time with these clients and explain why
the rates have increased so much.
have problems with people who are under-insured," continued
Mrs. Albury. "People should keep their sum insured up to
date or they will not get a properly adjusted claim in the event
of a disaster." For example, if a house is worth $100,000
and is insured for only $70,000, if damages occur to the house
the claim will only pay out for 70 percent of the cost. "If
you are under-insured, we have to treat it as if you are self-insuring
for the balance," says Mrs. Albury. "To decrease premiums,
we can increase the deductible on the insurance, or the client
can do partial insurance ("selective insurance" that
Robert Pinder talked about). People need to shop around and compare
policies and pricing.