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Insurers’ Anger At Premiums ‘Holiday’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian life and health insurers were yesterday said to be "up in arms" after the Government ordered them to continue paying multi-million dollar claims without receiving any income in return.

Multiple industry sources, speaking on condition of anonymity, described this aspect of the Minnis administration's Emergency Powers (COVID-19) (Special Provisions) Order 2020 as "absurd" and akin to "providing free food from Super Value for the duration" of the pandemic.

Tribune Business was told that the Bahamas Insurance Association (BIA) was taking legal advice ahead of a meeting today where the industry will plot its response to a measure that mandates it receive no premium income on all life and health insurance policies for at least three months.

The Government Order, which was published yesterday after being signed by the Prime Minister on March 30, states: "In respect of any health, medical and life insurance policy, the obligation to pay any insurance premium under any policy of insurance is suspended from the day of March 17, 2020, for the duration of the state of public emergency and extending 60 days thereafter.

"Should any insured event occur giving rise to the liability of the insurer to pay a claim to the insured, the insurer shall honour the claim and only deduct the renewal fee and any deductible from the money paid under the claim."

The Government's move was said to have taken the $2bn life and health insurance industry by complete surprise, with sources adding that the sector's regulator, the Insurance Commission of The Bahamas, had also been blindsided. It was also suggested that the Government's external legal advisers, Graham, Thompson & Company, were unaware of its intentions.

This newspaper was told that the insurance-related Order "came out of the Attorney General's Office" but that could not be confirmed. Carl Bethel QC, the attorney general, did not return Tribune Business's call and message, so the rationale for the Government's move is unknown.

However, several contacts speculated whether the blanket premium waiver was designed - at least in part - to reward Atlantis and Baha Mar for committing to pay the health insurance for their combined 13,000-plus employees for a period of 60 days following the two hotels' closure

Given that the nationwide lockdown has been extended until at least April 8, the Government's Order means that the earliest life and health insurance underwriters - the likes of Colina Insurance Company; Family Guardian; BAF Financial; and Atlantic Medical - can expect to receive premium income on coverage in effect will be June 7, 2020.

Anton Sealey, the BIA's interim chairman, did not respond to messages sent to him before press deadline. Sandy Morley, the BIA's vice-chairman and BAF Financial's managing director, confirmed: "There is an industry meeting tomorrow [today]. Will be in position to provide an industry response after the meeting." He declined to comment further.

However, one insurance industry source questioned whether the Government has the "constitutional power" to make such an Order that effectively tears up all contracts between Bahamian life and health insurers and their policyholders.

While it potentially provides significant savings for all Bahamian policyholders, individuals and especially those businesses with five and six-figure monthly premium payments on group (employee) medical coverage, the source said the Order was effectively telling insurers to "shut the doors".

For they are being saddled with potential multi-million dollar claims liabilities without receiving a cent of income in return, other than deductible and renewal fees. Insurance contacts said carriers especially feared being left "holding the bag" by companies who, while incurring substantial claims during the period of 'free' insurance, suddenly turn around and switch to a new provider once the crisis passes.

They added that the Government's Order threatens to also disrupt local insurers' treaty arrangements with international reinsurers, while also impacting their solvency requirements and ability to match long-term assets with the long-term liabilities created by life insurance companies.

The several thousand shareholders in Colina and Family Guardian, both of which are publicly-traded, BISX-listed companies, also stand to be impacted. While their investments are subject to risk, the industry's bigger concern is seemingly that the Government's Order could destabilise a key economic sector over the longer term.

Mr Morley earlier this year underlined the life and health insurance sector's importance, saying it has "in excess of $1.9bn" in combined assets. "In 2018, the industry collectively paid $298m in claims, and I expect in 2019 that number will be in excess of $300m. Additionally, collectively we paid in excess of $13m in premium taxes," he added.

One insurance industry said bluntly of the Government's Order: "That cannot work. I don't know how everybody is going to come out the other end. They're going to upset it. The Government's consultant didn't know they were going to do that, the Insurance Commission didn't know they were going to do that. I don't think the Government has the constitutional power to do it.

"The whole industry is up in arms. We basically shut the doors. They're saying we have to keep people on coverage but not get the premium, but you have to pay the reinsurers every month. You have no income, but are expected to pay the claims. What are you going to do if you have multi-million dollar claims?"

The source pointed out that one premature birth-related claim could cost a Bahamian health insurer $400,000-$500,000, while a single open heart surgery would run up to $1m. "Say you're the insurer, and you have to pay all these claims," they explained. "Typically the claims are multiples of the premium anyway.

"Let's say you pay out millions of dollars a month. When this over, you go to collect the premium due. The client can go with someone else and you're left holding the bag. The industry is totally up in arms about it. This is not the way insurance works. Every single insurer is up in arms saying this cannot be, this doesn't work like this.

"It's like saying for the duration of the lockdown you'll get free food from Super Value. It makes no economic sense. The insurance policy is a contract. How could they supersede a contract? There are all kinds of issues with this. It's just absurd, totally absurd. You can't even recover your premium. Whoever drafted this had no clue about the way insurance works whatsoever."

The Government has previously said all sectors of the Bahamian economy and society must share in the COVID-19 pain. Yet, as with water and electricity bills, it has in the case of life and health insurance failed to distinguish between those who can still pay their policies and those who cannot.

Comments

tetelestai 7 months, 4 weeks ago

And just who does the industry expect will pay? Maybe they didnt get the memo that 17000 former workers filed for unemployment, not including hotel workers! But greedy Pattick Ward, et al, do not care. They just want their money. Shame, shame.

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BahamaPundit 7 months, 4 weeks ago

There's going to be lots of situations like this due to Corona Virus. Rent, insurance etc. It is what it is. Brave decision by the Government!

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jackbnimble 7 months, 4 weeks ago

I predict that inflation will go to a whole new level after this. So many businesses are taking hits with just a few rich whites getting even richer in the midst of this crisis. Insurance premiums are already high with Dorian as the excuse. The government is just giving them an excuse to go up to recoup their loses. Great idea with possibly nasty implications.

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avidreader 7 months, 4 weeks ago

Please note that contrary to popular belief, not all "whites" are rich just as not all "blacks" are poor. The days of such gross simplification are long past. And, by the way, has anyone heard anything about the fate of Bahamasair and Western Air related to the resumption of air service to the Family Islands?

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bahamian242 7 months, 4 weeks ago

Maybe it's time for them to thier part for society, and they just getting the hint.

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moncurcool 7 months, 4 weeks ago

I honestly don't understand this situation. How can you tell a company pay claims and tell the claimants don't pay any of your premiums? Guess next they will order landlords not to charge rent and people live rent free? . Each action has a consequence. If the government wants to be brave, then go after the predatory banking industry. Place an order that banks still provide mortgage coverage, but charge no interest for the next 60 day and people don't have to pay mortgage.

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bogart 7 months, 4 weeks ago

Excellent points. But now you opened Pandora's Box.....for every dollar in loans, Billions of dollars in loans use and mandates that LOAN CUSTOMERS ARE REQUIRED TO PLEDGE AND ASSIGNED LIFE INSURANCES AS COLLATERAL SECURITY FOR LOANS....COMPREHENSIVE CAR INSURANCES....COMPREHENSIVE HOMEOWNERS KNSURANCES ALL WITH POLICIES ASSIGNED TO BANK/LENDER AS MORTAGEE with in event of calamity the lender gets proceeds of policy to repay the loan. There are exceptions in certain loans. Lots of insurances out there...Lawyers insurances, indemnities medical, aircraft, boats, shipping, just about every professionals insurances....

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realitycheck242 7 months, 4 weeks ago

The entire Insurance Industry needs to suck this Covid -19 situation up and take their losses like every body else. Over the years they have cause many claimants much pain, and sorrow with sub standard payments and inflated deductible payments and they always find some find print in their contracts to justify paying less. Take this covert-19 body blow like every one It will not last forever. No industry is immune from this situation

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Well_mudda_take_sic 7 months, 4 weeks ago

Ditto that @realitycheck242.

The very greedy insurers are naturally upset that their license to steal will not yield the super profits they've grown accustomed to receiving by royally shafting policyholders one way or another.

Now maybe the ideal time for government to think more about moving towards a single payer universal healthcare system.

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Porcupine 7 months, 4 weeks ago

Agreed. And, yes to single payer universal health care. There is NO reason health care should be a for-profit enterprise. Wanna make money? Do real work and produce something.

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moncurcool 7 months, 4 weeks ago

So are we saying people should do business for free? I agree the insurance company should take their losses, but are they to provide services for all customers and they have no obligation to pay for those services? Note, if the government can do this to the insurance company, how soon can they do it to us and say they will not provide light, or water, but we must still pay the bill. Would we be okay with that?

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Well_mudda_take_sic 7 months, 4 weeks ago

You will soon have no light from BPL....trust me. And it won't be too long before you have no water from W&S Corp.

The bill for decades of ever increasing corruption and incompetence throughout government, the civil workforce and all government controlled enterprises is finally being tabled for payment and the piggy bank was long ago emptied by the now very wealthy few.

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bogart 7 months, 4 weeks ago

"Over the years they have caused many claimants much pain, and sorrow...."....much more true because the Govt have taken nations money belonging even to persons, elderly, children, poor, children on lunch meals, etcetc.... nothing to do with the CLICO company... to pay the persons connected to CLICO a company governed by its Board of Directors, owner, management....and whomsoever are Regulatory body sticking the public with this.

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avidreader 7 months, 4 weeks ago

Excuse me posting again so soon but being at home most of the day is very difficult. It appears that many people both inside and outside of government have not quite realized the extent of this unprecedented situation in which we find ourselves. I fear that numerous uncoordinated measures implemented to alleviate one perceived problem could lead to unforeseen consequences in other areas. There is little doubt that a prolonged period of lockdown will result in severe levels of unemployment from which it will be difficult to recover. As a result, our over reliance on tourism will finally be seen as an inherent weakness in the economy even by those who failed to recognise this reality earlier.

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observer2 7 months, 4 weeks ago

I am comparing the actions of the Bahamian government to those of Cayman (Compass Compass) and the Turks and Caicos (Turks and Caicos Weekly) both newspapers can be received online. Cayman and TCI are colonies of the UK and therefore their governments are run much more efficiently and correctly.

We are all doing the same thing except for the Bahamian governments propensity to questionably and probably unconstitutionally fiddle with private agreements at worse and at best to rule in a dictatorial and none consultative manner.

With the BEC Rate Bond, which thankfully failed, the government was attempting to force BEC customers to assume $650 million of BEC debt. This is legally impossible under contract law because BEC clients signed up to purchase electricity from BEC and not to assume their debt for zero consideration. Did these guys take Intro to Law 101 in College?

The issue with the insurance companies is far more interesting because I believe they can do it under the Emergency Powers Act. In fact they can do almost anything under the act which is why Cayman probably didn't use it to enforce their "soft" and "hard" curfews. TCI used the Emergency Powers Act.

My fear is what private property is next for the government to "take over" under the Act with zero consultation with steak holders?

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Porcupine 7 months, 4 weeks ago

Health care now, more than ever, should be seen as a basic human right. The inability for anyone to access health care puts us all at risk, and exponentially inflates the true total health care costs, both public and private, as this pandemic clearly shows.. The private insurance game is rigged and does not produce any better health outcomes. Health insurance companies make their money denying people needed treatments and drugs. Who hasn't heard these heartbreaking stories? Get real, or get Christian if you like, and get profit out of health care. Let the insurance companies find a more honest line of work. The comparison to Super Value is not correct. It would be if you had to pay for your groceries 5, maybe 10 years in advance. And then, the manager could tell you what you can and cannot get that week. Perhaps the good that will come out of this situation is a well needed reset. Back to basics maybe. Try going for a week without food. Now try going for a week without insurance. Apples and oranges. All of the private health insurance companies employees, the thousands of them, could actually help produce things of value for this country. The insurance industry merely takes money out of the real economy and shifts it, plus profits, into what, please tell me? I understand the value of having a service industry, however a disproportionate amount of money is changing hands without true value or a product being created. The global taxpayer has, and is, bailing out these massive companies that have been looted by their managers. We already have socialism. It is at work with every government bailout a company benefits from. Now we need that same type of thinking, that benefits the individual.

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Kofi 7 months, 4 weeks ago

Obviously the government are now liable for the premiums. We will have to defer these costs on the back end with taxes or higher fees. If the industry has an IOU from the government via the emergency order, they can then raise cash in the market to meet their expenses and their liabilities, as they become due..

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