A more aware consumer and a still struggling economy are driving up competition and driving insurance premiums down to unsustainable levels, industry and regulatory officials said.
President and Chief Executive Officer of Sagicor General David Alleyne told Barbados TODAY as a result of stiff competition and a soft reinsurance market, rates continued to fall to their lowest levels in 30 years.
“I think the economy has not helped. There is a direct correlation between economic performance and the performance in the insurance industry, and the fact that the economy has been relatively stagnant there has been little growth in the insurance market. So what has been happening in the industry is that risks have just been moving around in the marketplace at lower and lower rates,” Alleyne said.
However, Alleyne, who spoke during today’s launch of the company’s Classic and Retro Car Insurance Policy, pointed out that Sagicor was taking steps to weather the storm by creating innovative products and upgrading aspects of its operations.
Regulator of the industry, Chief Executive Officer of the Financial Services Commission (FSC) Randy Graham, agreed that an increase in economic activity could result in more business for the insurance industry.
He explained competition among the companies, coupled with the fact that consumers were more educated about the industry and were “looking for the best rates” as they seek to cut back on their spending, had resulted in low premiums.
“They are not going to pay more when they can get the identical product cheaper, and that might be a reason for the premium rates as well,” Graham stated.
The FSC boss stressed it was up to the insurance companies to determine how low they wanted to take their rates and for how long.
However, Graham did not expect any company to maintain premiums at unsustainable levels for prolonged periods because of the risk of failure.
“They have to continuously look at their rates to see what they can afford to offer the market and offer the market the best rate,” he said.
It was just yesterday that Minister of Industry and Commerce Donville Inniss blamed drivers who had accidents for a rise in insurance premiums.
“The reality about it is that somebody else had an accident and when you put it all in the pool insurance companies really have no choice but to push our premiums up quite a bit,” Inniss said while speaking at the launch of the Barbados Beverage Alcohol Alliance at the Mount Gay Visitor’s Centre.
Alleyne agreed that the number of accidents had some bearing on insurance premiums, similar to the impact of major catastrophic events such as hurricanes.