Crash Worry: Possible $100 million payout has insurers concerned

Local insurers are seeking to put the brakes on a potential payout of an unprecedented $100 million in vehicular accident claims this year, which the industry spokesman warns would be difficult to fund.

In a bid to curb the record payout, insurers are banking on public buy-in for a proposed safe driving campaign.

President of the General Insurance Association of Barbados (GIAB), Randy Graham revealed in an interview with Barbados TODAY that the insurance sector’s annual claims payouts have been escalating at a staggering rate, with figures for 2020 to 2022 indicating a yearly increase of approximately $12 million. The claims costs have surged from $59.1 million in 2020 to $83.1 million in 2022, prompting concerns about a potential $100 million payout in 2024.

Graham explained the delicate balance of premiums and payouts, emphasising that rising claims push up premiums, impacting all policyholders.

“The police said there were 7 400 accidents registered last year. Recurring accidents per month are just too much for this country. To pay $95 million to repair cars and buy car parts, we could do something else with that money. If the trend continues, it could reach $100 million,” he said.

Graham explained that while “Peter pays for Paul” when rising claims push up premiums, “Peter’s” increase will be less.

“That’s the way the pool works; the more claims you have, the more you are going to have to increase the premiums to pay them,” said the GIAB head. “Peter pays for Paul in this situation because the issue is, in insurance, we never know who will get in the accident. Those people who get in the accidents have to pay higher premiums for sure, because they get into an accident and lose their no-claim discount and their premiums will go up, and rightfully so. Those persons who cause accidents will definitely pay more, but the other persons unfortunately still end up paying a little higher because we never know who is going to be in the accident next year. Everybody contributes to the pool that is needed, but those people who cause the accidents pay the most,” he added, noting the potential foreign currency issue as the funds paid out for repairs often go towards importing parts, “straining the country’s resources unnecessarily”.

In response to the escalating problem, Graham announced a renewed focus on public education to promote safe driving practices. He stressed the importance of preventative measures, citing successful examples from the United States and the United Kingdom, where enhanced signage and campaigns against distractions contributed to a reduction in accidents.

Graham outlined the industry’s commitment to collaborating with government agencies, the police, and any relevant stakeholders to disseminate crucial information on safe driving. The proposal includes improved road signage and measures to reduce driver distractions, with the industry expressing its willingness to contribute financially to support these initiatives.

“What we are trying to do as an industry is putting a lot of education out there about safe driving. The best way to curb this is to stop the accidents in the first place,” he said.

“If you go to the United States or UK, you see all of the signage now on the road is changing. Not just where to drive…but a lot of signage says ‘Put down your cell phone,’ ‘Stop driving,’ ‘If you see something, say something,’ ‘If you see somebody swerving and they look as though they might be under the influence, call this number and let the police come and pull them over’.

“And they have been getting success with that, and I think that as an industry, this year we definitely want to partner with GIS [Government Information Service], the police, [and] anybody who can get the communication out so that drivers start to pay attention and stop the accidents. Signage also above the road, not painted on the road; the industry is more than happy to partner to pay for some of it. We will definitely contribute towards it because it is a benefit to the country. So, what we are looking for is better signage and less distracted drivers.”

The GIAB’s safe driving campaign aims to reach motorists behind the wheels of the approximately 150 000 vehicles traversing the islands’ roads. The overarching goal is to instil responsible driving habits and significantly mitigate the escalating costs associated with vehicular accidents. 

emmanueljoseph@barbadostoday.bb