Insurance costs represent a big and ongoing expense

Insurance is one of those intangibles, the value of which one cannot realise until something goes wrong. Many Barbadians who are struggling with the high cost of living and the everyday demands of life in the country may place insurance at the bottom of the tier of monthly demands.

People often relate to products they can see, touch, smell, taste or experience. Thus, convincing individuals that they should set aside sums of money each month for something they may never use or even benefit from, can be a difficult sell.

Over the years, insurance companies have sharpened their sales pitches. Home insurance, for example, is a valuable asset that you may never use but in the event that you require it after a fire, theft, flood or wind damage, its true value is revealed.

Most comprehensive property insurance policies often include public liability coverage which protects you from legal costs and damages in the event someone is injured while at your property.

The recent passage of Hurricane Beryl on July 1 has jolted most Barbadians into the reality that our geographical position in the island chain provides us with no greater protection from being impacted by a severe weather system than any of our neighbours.

Unfortunately, the importance of property insurance coverage is not limited to hurricane season. The number of house fires that render scores of people homeless each year is another timely reminder that tragedies do not have seasons.

Despite the evidence, however, Barbados stands at a statistically embarrassing juncture when we examine the percentage of homes that are protected by insurance.

Financial institutions demand that mortgage borrowers protect this most valuable investment over the life of the mortgage. With nearly 50 per cent of all houses in Barbados fully owned and not under a mortgage arrangement, it is sad that less than 40 per cent are insured.

President of the General Insurance Association of Barbados Mr Randy Graham has long lamented this high level of exposure. The sector assesses that 60 to 70 per cent of homes and buildings in Barbados are uninsured.

As the impact on the fishing industry has demonstrated, it is the state, or rather taxpayers who have to step in when a crisis occurs.

Many have asked the question; what would have been the result were there a direct hit by category 4 Beryl on Barbados with many homes damaged and or destroyed, along with the impact of storm surges on the fishing industry?

The consequence is unimaginable.

When it comes down to kitchen table facts, there is an admission that people are going to make decisions about day-to-day survival.

A lower middle class family with a mortgage, car loan, two credit cards, and two small children in primary school, actually has to set aside a significant sum of money each month for various forms of insurance. Collectively, insurance as a monthly expense can be quite prohibitive.

Such a family has to set aside funds for mandatory car insurance, home insurance as a requirement for the mortgage, medical insurance for family, along with life insurance for each parent. If the family is one that plans ahead for their children, it is likely that they have sought life insurance policies for their children. In addition, the couple may be setting aside a sum each month for their pension plan.

Cumulatively, these insurance costs add up to more than $600 or $700 each month. That is a significant sum by any measure. Sadly, in a period of high food prices and increasing cost of services, many families are making tough choices, some that may be to their detriment in the long run.

These are real economic conundrums households must confront. However, as the recently released 2023 Financial Stability Report stated: “The potential global economic slowdown could limit further growth in the industry, as it could reduce consumer demand for insurance coverage leading to increased levels of underinsurance and uninsurance.”

This is serious food for thought.