Micro-insurance proposal to close the gap


Tribune Business Reporter


BAHAMAS First’s top executive yesterday suggested government’s in the Caribbean should consider providing some form of micro-insurance solutions for people who cannot afford traditional insurance, noting the persistently low insurance penetration rates ‘is largely a question of economics’.

Patrick Ward, speaking as a panelist at an AM Best’s “State of the Caribbean Insurance Markets” webinar, acknowledged there is a significant insurance penetration gap in Caribbean.

“It’s largely a question of economics. If you look at the cost of insurance for the average persons in the Caribbean - and particularly the Northern Caribbean - a lot of people are going to find it very difficult to buy up to the full amount of insurance protection, particularly focused on what’s happening on the property side. As economies improve people will have the ability to buy more insurance protection to fill that penetration gap but there is always going to be a question of economics,” said Mr Ward.

He continued: “There is a role to play outside of the traditional insurance boundaries where governments in these respective countries have to provide or assist in providing some kind of stop-gap measure; maybe micro-insurance solutions for persons that can’t afford to provide the traditional covers. If you don’t have that happening your’e going to see the continuation of the penetration gap, not because there is not an awareness for the need for insurance but a lot of it comes down to economics.

Mr Ward noted that while there has been some conversation in recent years over the issue, now broad-based solution has been reached. There has been a conversation that has sort of been developing in the past few years in particular. I’m not aware broad based approach to anyone solution. I am aware that there are some conversations going on,” he said.

Mr Ward added: “If you are a government in a country that has significant exposure to catastrophic losses it is definitely something you want to have a conversation about. To the extent that people don’t pay insurance in the private sector it is going to largely fall on the governments of those respective countries to provide some kind of solution for people that can’t afford to buy insurance, have significant losses and damages but need some assistance to get back on track with their lives. There is definitely a motivation for government to look at this and take it seriously and assist in providing some solution.”

An analysis of AM Best-rated property/casualty insurers based in the Caribbean noted that recent hurricanes highlighted the region’s exposure to extreme weather events and the lack of insurance penetration in the Caribbean.

“Persistently low insurance penetration rates compound the economic loss associated with catastrophic events and recent storms have highlighted the need for the region to establish financial buffers and build structural resilience. Hurricanes and earthquakes are a major concern to property writers, but they are also a concern to life/health writers. These devastating events can cause significant loss of life and create health issues, especially in developing countries whose infrastructures are fragile or there is limited access to medical care,” the report stated.