The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE insurance industry in the Bahamas is concerned that it may see its customer base shrink, an industry executive noting that the high cost of living, the impact of Value Added Tax (VAT) and stagnant wages may lead many consumers ultimately to drop their coverage.

Howard Knowles, chairman of the Bahamas Insurance Association (BIA), told Tribune Business that while such concerns were perhaps not unique to the insurance industry it was a real concern. Mr Knowles noted that with the insurance sector to fall under the VAT net on July 1, there would undoubtedly be an impact to consumers.

“It’s going to impact everyone and insurance is not like buying groceries,” Mr Knowles said. “You’re talking about home insurance for instance, which could have significant premiums, and you’re talking about significant amounts of VAT being added on top. We all recognise that everyone needs insurance but again it’s not like a bread basket item.

“It’s important but obviously we have seen a trend that sometime when the economy goes bad one of the first things people drop is insurance. That is scary because we’re going to have potentially more uninsured drivers on the road.

“What people do is find a loophole in the system where the insurance is up on a certain date but their birthday month for licensing does not come up until a certain date so they didn’t renew until their birthday month and all those months in between they are driving without insurance. Then there are people who don’t have a bank loan on their home who may decide not to renew or reduce their cover. Hurricane season is approaching and while we haven’t had one in a long time that doesn’t mean we wont have one. It’s pretty vital. It’s something that in our region we need to have.”

Mr Knowles noted that while the cost of living has gone up, wages have not gone up commensurately.

“The cost of living has gone up in many ways but salaries have not gone up commensurately and people only have so much to spend but the spending power is less. People are going to have to make decisions on what they could afford to spend the little money they now have on.

“That’s where we have that fear that our consumer base may shrink and you may have a smaller industry. Of course it is not unique to the insurance industry. I’m sure all industries such have the same concerns,” said Mr Knowles.