By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First executives yesterday urged the Government to reduce the insurance tax burden, revealing they were mulling innovative ways to combat client under-insurance.

Keith Rolle, its senior underwriting vice-president, said the insurer was examining whether it could help clients with property valuations to illustrate why they were not fully covered for catastrophic losses.

He added that previous efforts to educate Bahamian homeowners and businesses about the perils of under-insurance appeared to have made little inroads into the problem based on Hurricane Matthew's aftermath.

Bahamas First incurred $83 million in gross losses from just over 2,800 claims, and Keith Rolle said: "Every event it seems like this is an issue. Hurricane Matthew was no exception....

"We're toying with the idea of how we can further assist our clients, looking at ways to go out and assist valuations of property for the client.... It's a work in progress."

Keith Rolle provided few details given that the proposal was in the initial development stages, and acknowledged that assessments by qualified appraisers typically cost around $500.

His concerns were echoed by Warren Rolle, NUA Insurance Agents & Brokers' managing director, who added: "Even though a number of people know their homes are under-insured, because of economic conditions they're not prepared to increase the value and pay an increased premium."

Under-insurance frequently occurs when homeowners and businesses make improvements to their premises, but continue to pay the same premium even though the property's value - and the sum insured - has increased as a result.

Should an insurance policy claim be made, the failure to fully insure will result in them being paid a relative portion - not the full value - of the claim.

The Insurance Commission of the Bahamas, the industry regulator, has even developed a form where sector clients can show they "understand the effects of underinsurance", but this - and ongoing educational efforts - have made little impact.

Despite "the most competitive season ever in the insurance industry in terms of pricing", Bahamas First executives said there had been "minimal" to zero take-up in terms of clients increasing sums insured or paying the necessary premium sum despite the lessons from Hurricane Matthew.

Patrick Ward, Bahamas First's president and chief executive, said under-insurance was "clearly an affordability issue", which was why the insurance industry had urged the former Christie administration not to impose Value-Added Tax (VAT) on property and casualty premiums.

The 7.5 per cent levy was imposed on top of the existing 3 per cent premium tax, and Mr Ward added: "In an environment where we are prone to catastrophic losses on an annual basis, we've argued that VAT is not an appropriate tax on insurance.

"We should be incentivising people to buy insurance, and take the burden off government with respect to it. It's better to have insurers funding expenditure on any claims rather than burdening the Government with the loss."

Mr Ward added that "the insurance industry is more effective on getting money into the hands of consumers than the Government is" following a Matthew-type event, with the burden on Bahamian taxpayers to finance disaster recovery substantially reduced.

Warren Rolle confirmed previous Tribune Business reports that the Government now "owes the industry a substantial sum in VAT refunds" on Matthew-related claims, an issue creating cash flow issues for both the insurance sector and Public Treasury.

Based on the $800 million in gross industry losses previously disclosed to this newspaper by Anton Saunders, RoyalStar's managing director, the sector's total refund bill could be $50 million-plus.

"That is the law they passed," Mr Saunders said of the Government, "and they passed that with the reservations of the insurance companies. We told them not to do it. That's the facts.

"Whatever the gross number ends up being, a percentage of that is what the Government is going to end up being on the hook for."

The Bahamas is one of very few nations to levy VAT on property and casualty premiums, given that it is difficult to determine exactly where the 'value has been added' in the production chain.

Mr Ward said yesterday: "We've raised this with the new administration, and they've promised to look at it quickly and come to some resolve."

Keith Rolle, meanwhile, said Bahamas First would in future "be more careful in insuring" properties in coastal areas that were prone to flooding and storm surges.

"Those are on our referral list," he added, "to see what the elevations are, and how far from the water they are. It's [Matthew] shown is the southern New Providence coast can be a real potential for disaster."