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Barbadians Told To Select The Right Insurance Company

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central_bankManaging Director of the Insurance Corporation of Barbados (ICBL) Wismar Greaves has been on radio recently warning Barbadians to be judicious when selecting the insurance company to do business. When someone of the stature of Mr. Greaves speaks the BU household is driven to listen and read between the lines if required.

In case the BU family has forgotten Mr. Greaves would have played a key role in growing the successful ICBL before it was sold by the former government to a Bermudan concern.

To paraphrase what Mr. Greaves said: he warned Barbadians that all insurance companies are not equal. He suggested that some insurance companies may not be in a position to settle claims efficiently. As always it is left to the blogs to ask the hard questions. We imagine that a man of Mr. Greaves stature in the insurance industry would have based his pronouncement on a factual position. It drives BU to wonder if the Supervisor of Insurance has taken an interest in Mr. Greaves’s statement, it does have a foreboding feel to it given the prevailing financial meltdown in many of the developed markets around the world.

Our layman understanding of how insurance companies cover their risk is based on an estimate based on tried and tested models where they re-insure a percentage of the overall portfolio. For example if ICBL has written one hundred dollars in policies, it may elect to cover 10% of the portfolio on the assumption that in a worst case scenario that would be the maximum exposure to claims. The other position is that ABC company may elect to cover 5% of the one hundred dollars in policies issued. In the two examples given ICBL would have shown the financial strength and prudence by deciding to buy a greater level of reinsurance.

The big question we have for the Supervisor of Insurance: is there a minimum requirement for insurance companies in Barbados cover/reinsure their portfolio?

We seem to recall that Mr. Wismar Greaves is a former Supervisor of Insurance and must be aware of what is happening in the industry. Maybe our local media can pursue this story all the way. It is called investigative journalism. We are not optimistic that it will happen, many of the insurance companies in Barbados are significant advertisers.

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25 responses to “Barbadians Told To Select The Right Insurance Company”

  1. Anthony James Barnett - author Avatar
    Anthony James Barnett – author

    It seems to me that ALL people in power have a propensity to hide facts behind rhetoric. There always seems to be a hidden agenda behind their words.

  2. ROK Avatar
    ROK

    I think we need to call in the Landship. Insurance is no more than a big su-su, but they got fellas creaming off the money. The Landship could run it better. They have 143 years experience doing it in Barbados.

  3. David Avatar
    David

    @ROK

    Insurance is a necessary evil. The issue like most things nowadays is enforcement of laws by the regulators.

  4. ROK Avatar
    ROK

    David

    The first problem is the regulations that govern them. What is the principle behind the regulations? To prevent unfair practices? To prevent extravagant increases in premiums?

    Insurance is a pefect example of capitalism gone wild. The art of leveraging on opportunity is a basic principle. If this is the practice, how can you effectively regulate that?

    Let us say, that house insurance was paid by Barbadians on 50,000 homes over a twenty year period at an average of $1500/month. Let us say that the insurance paid out claims on 100 houses over that period at an average of $100,000 per house.

    The mathematics reveal that the Insurance company collected $1500M and only paid out $10M. Where is the $1490M?

    How many cars on the road? let us say that the average premium is about $2000. Let us say that there are only 50,000 cars on the road. This is an example. It means that the insurance companies are collecting at least $100M per year. What amount of accidents do these companies cover in a year in compensation? Suppose they covered 1000 accidents at $20,000 per accident (average), that is only $20M.

    My point? Well the excess monies being collected should continuously go into a pool every year and allowed to accumulate to the point where the Insurance pool could cover every house and every car in Barbados if there was a total disaster. at that point, insurance premiums should start coming down and funds added to the pool annually to deal with increased prices.

    This is the only way to regulate these companies; based on the principle that there is some social responsibility on the private sector in whatever they undertake and it cannot be about sheer profit.

  5. David Avatar
    David

    But Brother ROK don’t you read the balance sheets of these insurance companies? Check their investments, cash in hand, their fancy buildings not to forget the buildings/real estate, BMWs, Mercedes which they own.

    It is all there to see!

  6. ROK Avatar
    ROK

    David

    I hope you did not miss the point: An Insurance fund pooled by the Insurance companies that tops up the fund every year. After some years, as it covers the cost of replacing Barbados, then insurance premiums should come down.

    If the insurance companies are allowed to continue doing business as usual, it means that we as a nation would have squandered our money.

    My point here is social responsibility. Regulate the insurance companies in a similar way to which the utility companies are regulated. They should not be allowed to earn more than a certain amount of profit. All the excess monies collected should go into a fund.

    It is at this point that premiums could be regulated based on a rate of top up of the fund annually, plus/minus the movement in the market.

    This talk about re-insuring and re-re-insuring is only a way to hide the money; break it up into portions so that it would not look like too much.

    With respect to the regulations, it has to be established what the regulations set out to achieve. I have not been able to establish a developmental principle behind the regulations and I am contending that there should be a national goal here if regulations are to make any sense and serve a national purpose; given the risks of natural disasters, fires and accident rates on the roads.

  7. David Avatar
    David

    @ROK
     
    Thanks for for the poke, no we did not miss your point, it was an oversight.
    We are not versed in insurance but logic says that all the insurance companies combined in Barbados do not have the financial wherewithal to cover the risk which may occur as a result of some catastrophic even. This is the reason they have to reinsure their risks and this is where a significant percentage of their money goes. Hopefully someone versed in that side of the business can share with the BU family.
     

  8. General Lee Avatar
    General Lee

    Every year you bet the insurance company that something bad is going to happen, the company takes your bet (money), if something happens you “win”, if it does not, then they win. You then go out and do everything possible to make sure that your prediction does not come true.
    At the end of the year you are happy that nothing bad happened and the company is happier.
    However because something bad happened to someone else, it will now cost you more to place the same bet next time.

  9. ROK Avatar
    ROK

    David

    Why do we have to re-insure if the amount of money generated by the actvity from year to year is surely going to catch up with the cost of repairs after a severe disaster? Why do we put that money into another company? It should be in a fund, like the National Insurance Fund. Now there is an insurance with a social responsibility. They pay pensions. How can we be paying out so much monthly from NIS and other insurance companies have no social responsibility.

    It is the duty of Government, for example, that if they require insurance to be compulsory for vehicles to ensure that owners are not taken advantage of.

    It is also the duty of Government, knowing that we are prone to natural disasters, to ensure that inurance companies live up to their responsibility to cover the island against disaster.

    Insurance companies take advantage. For example, take schools which are insured; the insurance company inserts a clause in the contract that only insures the school for activities during school time. If the community wants to use a school it then has to take out public liability insurance; even though the building is already insured for public liability and the school is willing to let you use it free of cost.

    There is a definite lack of social responsibility here.

  10. ROK Avatar
    ROK

    David,

    I beg to differ that all the insurance companies combined in Barbados do not have the financial wherewithal to cover the risk which may occur as a result of some catastrophic even.

    That is an excuse for the insurance companies to cream off the money year after year. Insurance companies are nothing more than cash cows that earn super profits unchecked and unabated. As I said before, Insurance companies are squandering national wealth and are allowed to do it. This money should be collected and properly managed.

  11. BAFBFP Avatar
    BAFBFP

    ROK
    That pool had it been created and properly managed twenty years ago would most certainly be serving in a manner that you suggested. But look at what the General is saying when it comes to reinsuring; we over time have been simply paying for someone else’s misfortune, and paying for reinsurance comes out of the foreign reserves. If Rok is right then the need for foreign reinsurance would have been a thing of the past.

    The best way to control the activities of financial institutions and food retail operations is to do what was being attempted (though not properly executed) in the eighties; to have companies like the BNB, ICB, BMC and indeed the PHD, government owned alternatives that could drive the prices in the market for the services being offered. But they are all closed now, or sold, same thing. Were the political parties over the years really interested in having these companies work as they should?

  12. Lore stanley Avatar
    Lore stanley

    Thanks for share the useful information.

  13. Lore stanley Avatar
    Lore stanley

    Thanks for share the useful information.

  14. ROK Avatar
    ROK

    BAFBFP

    I know that I am correct. You see when it comes to corruption and dishonesty, everybody plays innocent.

    Take that announcement by C&W who could do something about the fraud but because they collecting money from it, they come out with a disclaimer instead.

    It suits the insurance companies not to have a pool because the more money can go into their pockets. It suits them also to talk about re-insurance because that is a good excuse to raise premiums.

    Disorder suits them. They talk about regulation only because their conscience pricking them right now. The sea of money rolling in, getting out of hand and all they doing is shipping out our currency, talking about re-insurance before they stop their extortion ways and build a pool.

    When we talk about cost of living these things have to be considered. Too many prices could very well be affected because of the high cost of insurance. Taxi and bus fares for example; they working for the insurance companies.

    Look at the plight of the taximan. After about ten years of operating that taxi, a taximan may find himself short trying to get a new one… but consider that the insurance company charging him about $10,000/year so after ten years the insurance company has $100,000 of that taximan’s money and he short to replace his taxi. Call that fair business?

  15. ROK Avatar
    ROK

    The selfish act of allowing the chaos so they could cream off the profits, is what I would call corporate irresponsibility.

    But then, the act of shipping out the money so the chaos could continue is nothing short of hurting the economy and depriving citizens of their hard earned disposable income.

    Creating the pool would help to regulate the industry as well, because you would know when the pool is etting full and hence reduce premiums to suit.

    As it is now, they assess you on current statistics and then charge you for accessing the re-insurce, where if you had a pool, there could be no such charge.

    This is a definite lack of planning here. Just consider that the NIS pays tens of thousands of pensions every month; far more than any insurance company pays in benefits or for risks for less premium. The insurance companies can do better.

    We should also look to investigate whether or not there is any collusion in the industry.

  16. David Avatar
    David

    ROK we have no doubt that there is some merit in creating a pool as you suggest but in the even of a catastrophe i.e. earthquake, hurricane flattens the island like Grenada or Dominica financial/risk prudence makes the idea one fraught with risk.

  17. Bonny Peppa Avatar
    Bonny Peppa

    ROK
    It is nothing short of an insult to compare insurance with a ‘su-su’. At least you get out what you put in in a ‘su-su’ but with insurance if you get back a cent from them consider yourself lucky. Insurance gives you NOTHING. You pay through your teeth and when it comes to paying out, they take you for a ride. All insurance companies should be erected along the highway because they are literally nothing but ‘highway’ robbery.

  18. ROK Avatar
    ROK

    David

    I have to ask myself what is the risk? In the same way we create a pool for Barbados we should create one in every Caribbean island or state. Standard.

    We talk about hurricanes and hurricane damages. I would now ask the question; in our experience with damage caused by natural disaster, to what extend did insurance rebuild? Further, what is the average contribution made by insurance companies to the total cost of the rebuilding process after a natural disaster?

    So who are these insurance guru companies that will undertake the re-insurance of these risks? Whomever they are, I know one thing for sure, if you don’t cover the risks, you don’t get the insurance. So who fooling who? That is one big capitalist myth.

  19. David Avatar
    David

    @ROK

    This is a big time question, a technical question which is outside of our competence. Removing the concept of insurance as we know would call for an upheaval in the way we do things. But the BU household is unsure that you are on the good grazing.

  20. ROK Avatar
    ROK

    David

    I am sure trhat I am on good grazing. Check the facts. The insurance is not going to cover it unless the premiums cover the risks. Who pays the premiums?

    The reinsurers will not re-insure a risk unless the insurance company cover the the cost of the risk. Who pays the insurance company for the risk to re-insure?

    The money does not drop out of the sky and note that on top of all this is that excess that will be to the profit of our local insurance companies and the re-insurers. A pool is not something that the private sector will do willingly because it would mean less largesse in their pockets. We are being taken for a serious ride here.

  21. Bush Tea Avatar
    Bush Tea

    @David
    I am with ROK.
    Insurance is one of the biggest scams ever invented. Like all good scams, it has its good points and, honestly managed, could actually be a major benefit to society. However in the hands of shady types (which inevitably happens) – SCAM.
    The advantage of establishing a national pool will be transparency, and the fact that you will be in control of your own destiny.

    In the event of a REAL disaster, Bush Tea suspects that many of these ‘Insurance Companies’ will be revealed as pyramid schemes…

  22. The Devil Avatar
    The Devil

    The following may very well be a “nanci” story but I suspect there is more than a grain of truth!

    I am told that the Closed Bretheren community which is one of the most business savvy groups on this island do NOT insure their assets or persons beyond what is required by law e.g. motor vehicle third party insurance.

    One story goes about the time a closed brethren member was negotiating a large loan from a bank on Broad Street. The manager was not from Barbados and was ignorant about the closed bretheren. He insisted that insurance be purchased consequent with the loan approval. The bretheren member told the manager that he didn’t believe in insurance and anyway should anything happen by way of death or destruction the loan would be repaid with the help of the bretheren community. This foreign manager persisted and said he would turn down the loan application if insurance was not taken out. The bretheren asked him if he knew anything about them (and their accounts). He said he didn’t care, “banking principles are banking principles!” Well news of this got to those higher up in the bank. The bretheren guy got his loan without any insurance requirement and the manager was sent packing back to where ever he had come from!

  23. Straight talk Avatar
    Straight talk

    I believe third party insurance should be factored into the Excise Licence.

    Anyone wishing to mitigate all risks could then take out a Fully Comprehensive policy with their insurance company.

    Everyone happy, GoB makes a little, job done.

  24. ROK - Banned BFP Avatar
    ROK – Banned BFP

    David

    I have found the example of a pool/fund being used by a company to insure itself.

    The Barbados Light & Power Company has such a fund. Between 2006 and 2007, it transferred $18.743M to the fund. See its annual report at page 13 on the line, “Transfer to self insurance fund:
    http://www.blpc.com.bb/FinReport/BLPCREPORT07.pdf

    If it works for BL&P, why can’t it work for the country? I would be good to know the size of the fund and when it started. BL&P assets are over $800M. It would be good to know how much of that the fund can now replace.

  25. Cherysh Avatar
    Cherysh

    All the points raised here a valid and one might think it would behoove the current Supervisor of Insurance to take note – but that will never happen because he does nothing (and I would tell him this to his face I really don’t care) but sit up in his office and collect his paycheck – his predecessor was little better but at least he occasionally made an attempt to ensure that some regulations were enforced – The “pool” scenario discussed above is very similar to the strategy used by the Mutual but our former whoremongerer Mr. Arthur allowed its sale to the detriment of not only Barbados but indeed the entire Caribbean – Sagicor now has the control of all the assets the Mutual used that pool to buy to ensure that should disaster strike their policy holder’s were well taken care of – but they now behave in the same manner as many of the other insurance companies – bad as they maybe however – I would advise anyone (friend or foe) to avoid that new building up in Warrens with the Red Blob and letters n the side – their final statements are nothing short of the type of fabrication seen since ENRON – since there is little reinsurance and investment going on with clients premiums more so than higher management visiting establishments of which their spouses would hardly approve – buying vehicles and building said phallic tower with the red blob on the side

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