By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer yesterday warned that many motorists may be driving with no coverage after suffering a 16 percent slump in auto premium income for the 2020 first half.

Tom Duff, Insurance Company of The Bahamas’ (ICB) general manager, told Tribune Business he was “suspicious” that the “double digit” decrease for the six months to end-June had resulted from clients either deferring premium payments - as permitted under the government’s COVID-19 emergency powers - or simply electing not to renew coverage.

The insurance industry is insisting that those taking advantage of the deferral must first inform their broker and agent to confirm that they qualify, as it is only intended to apply to persons who have lost their jobs and/or income due to the pandemic.

However, the ICB chief voiced concern that many have failed to do so and, as a consequence, are driving with no insurance - thereby exposing themselves and fellow motorists to potentially catastrophic financial losses and liabilities, especially if there are injuries or worse.

Mr Duff admitted that the Bahamian insurance industry is “between a rock and a hard place” in trying to encourage clients to maintain home and auto coverage at potentially higher premium rates during a time when “the economy is in dire straits” due to the COVID-19 pandemic, as illustrated by John Bull’s decision yesterday to permanently terminate 103 workers - some 15 percent of its group-wide staff.

Pointing to Hurricane Dorian’s $3.4bn in damages and losses as one reason why property protection should not be included among the “cost-cutting measures” used by households and businesses, he conceded that persuading Bahamians of insurance’s worth is now “a real challenge” with unemployment thought to be around 40 percent and many others on reduced incomes and work weeks.

Mr Duff added that Bahamian property and casualty underwriters are also being squeezed by their reinsurance partners, who provide the financing that covers most of this nation’s multi-billion dollar exposure to catastrophic hurricanes and other natural disasters.

He explained that reinsurers were seeking “pay back” to help cover the $1.5-$2bn losses incurred from Dorian, plus other major storms to strike the Caribbean in recent years, which meant Bahamian carriers will need to carefully “navigate” upcoming contract renewal negotiations to minimise premium rate increases locally.

And COVID-19 had further compounded Dorian’s impact, Mr Duff said, as the industry’s gross income was unlikely to settle down much before year-end 2020. This is when the Government’s emergency orders and premium deferral are currently thought likely to expire, and customers will have 60 days to either pay up or agree a payment plan.

“The thing we’re all [insurers] trying to ensure is the customer, if they wish to take advantage of this deferral, they must contact their insurance company, explain their circumstances and that they want to use it,” the ICB chief added. “The insurer will then record that on the file. Should there be a claim in this period will have a note that coverage is still in effect.

“We don’t want people driving a motor vehicle with no certificate of insurance and no contact with the insurer.” Mr Duff expressed concern that the deferral on vehicle licensing at the Road Traffic Department until end-August may have eroded the motivation for motorists to take out or renew protection since they do not have to go through that process which requires they have insurance.

There is some confusion as to whether the vehicle licensing/inspection moratorium remains in place, given that both the Road Traffic Department and insurance industry have reopened following the COVID-19 lockdown, thus enabling Bahamians to pay their auto premiums.

However, Mr Duff told Tribune Business: “I just wonder if many customers are driving around with no insurance having made no contact with the insurance company. They certainly have no cover.”

ICB, which is the Bahamian-domiciled carrier through which BISX-listed J. S. Johnson places much of its property and casualty business, had likely experienced the financial fall-out from this during the 2020 first half, he added.

“If you look at our motor income for the first six months of the year, you can see it is down by double digits percentage-wise,” the ICB chief said. “We were down 16 percent for the first six months, and my suspicion is a lot of this was due to people taking up the deferral option or really just not renewing motor coverage.

“We’ll have to analyse it in a bit more detail. It could be a mixture of things. The deferral option, downgrading coverage from comprehensive to third-party, and the economy in general - people selling their car - could all be factors.

“I’m pretty sure the other companies will be seeing a similar kind of trend on motor. As we come through the crisis and the emergency orders drop away, we will see a pick-up again. For the moment, it’s causing a bit of a hiccup.”

The Government’s Emergency Powers (COVID-19) (Special Provisions) (Amendment) Order 2020, dated April 16, stipulates that for the entire COVID-19 national emergency period dating back to March 17, plus a 60-day period from when it ends, persons who have been terminated from their jobs or are unable to make due premium payments online can defer these outlays.

Once the lockdown ends, clients must either pay the full amount of premium due or agree a payment plan with their underwriters during that 60-day period. Persons still working or with the means to pay, and who can do so remotely, are not covered and must continue to pay.

Mr Duff, meanwhile, said insurers faced a major obstacle in convincing Bahamian households and businesses to maintain already-expensive property and auto coverage in a depressed economic environment amid external pressures for further rate increases.

“We’re absolutely between a rock and a hard place right now trying to deal with this,” he told Tribune Business. “That is the challenge: How do we persuade customers to insure - and potentially at higher rates - when the economy is in such dire straits.

“It’s a real challenge but one which we’re going to have to face. I think it’s going to be a huge challenge. It really is. Many customers will be faced with a dilemma of being out of work, at least temporarily, but their homeowners insurance is falling due for renewal.

“We would try our very best to persuade them this is not cost-cutting they should be looking at. In Abaco, many people ended up with their lives destroyed, homes destroyed, no insurance and no ability to rebuild their lives.

“We will try to impress on customers to continue their insurance, but there’s a challenge, no doubt about it.” Residential and commercial properties upon which mortgage loans are secured will be required by the lender to take out full catastrophe coverage, otherwise they will do it for them, thereby somewhat lessening the number of uninsured dwellings and businesses.

However, Mr Duff acknowledged that external pressure for Bahamian property and casualty premiums to increase was happening at the worst possible time. “The big challenge the industry has faced this year is renegotiating reinsurance programmes on the back of this [Dorian] loss,” he explained.

“Reinsurers are looking for us to help them in the pay back of their losses, and we don’t have much option....The third major challenge is how we navigate the renegotiation of the reinsurance programmes in November and December.

“One of the things we know is most of the major reinsurers who support the Caribbean programmes did incur major losses last year with Dorian, and obviously their balance sheets have been further eroded by COVID-19 - not just at a technical level but their investment portfolios.

“We’re anticipating next year that the cost of their capital will increase, putting pressure on reinsurance programmes. It’s compounding, and we anticipate it’s another challenge we will have to face.”