By NEIL HARTNELL
Tribune Business Editor
The attorney general yesterday pledged to “clarify” a life and health insurance order that was designed to prevent poor and elderly policyholders suffering a “catastrophe” amid the COVID-19 crisis.
Carl Bethel QC told Tribune Business that the government will change part of the Emergency Powers (Special Provisions) Order 2020 to make clear that the near-90 day exemption from paying due life and health insurance premiums applies only to those who cannot do so online.
He explained that the initial language, which left the Bahamian insurance industry “up in arms”, was designed to protect “the most vulnerable” policyholders on two fronts.
Besides not having to physically visit insurance company offices to make their premium payments, which could potentially expose them to the COVID-19 virus and increase its spread, Mr Bethel said the first order was also intended to safeguard poor and elderly policyholders from the possibility that their coverage would lapse as a result of the non-payment.
Reiterating that the government was responding to an evolving “emergency”, with the impacts and effects changing almost daily, Mr Bethel promised the insurance industry that the government was “willing to listen” to any “counter-proposal” that better achieved its social protection objectives.
And subsequent negotiations between the the sector and the government appeared to bear fruit, with the attorney general confirming to Tribune Business: “The order will be clarified to make it clear that it only applies to persons who cannot make online payments.
“All persons whose premiums before the emergency were paid by online means must continue to do so. The COVID-19 Order (No.2) 2020 permits online services to continue, and it is expected that persons who can pay online will honour their contractual obligations as and when they fall due.”
The promised alteration was greeted with relief by a life and health insurance sector that warned their “operating model” would have been forced to change had the government stuck to the original order. This, they added, would have impacted “staffing levels” - an indication that carriers would have been forced to lay-off workers and add to the jobless ranks that have already been swollen by thousands.
Sandy Morley, the Bahamas Insurance Association’s (BIA) vice-chairman, confirmed to Tribune Business that the first order would have had “widespread unintended consequences” had it remained in effect.
Revealing that talks with the government had “progressed very well”, he added that the life and health insurance industry had suspended policy terminations for those unable to pay online for the the duration of the national lockdown plus 14 days afterwards.
The initial Order, which was signed by the Prime Minister on March 30, previously created uproar in the life and health insurance sector as it required underwriters to continue paying multi-million dollar claims without receiving any income in return - something several likened to “receiving free food from Super Value” for the duration of the COVID-19 lockdown.
Several industry sources warned that the Government’s actions would destabilise a $1.9bn industry, and expose it to significant liabilities it may be unable to recover from policyholders once the economic shutdown ends.
However, Mr Bethel told Tribune Business that the nature of the COVID-19 pandemic was such that the Government needed to react quickly to all eventualities, adding that the BIA and wider insurance industry had failed to “reach out” prior to the Order and reveal what measures they were taking to assist policyholders suffering job and income losses as a result.
“This is an emergency. It’s a crisis. We have to take steps to protect the country,” he said. “These are the worst of times. We could not consult with the entirety of economic interests when we ordered the shutdown of all but essential businesses. We acted in an emergency to save lives. The business sectors engaged, and certain limited exemptions were granted.
“It’s only a deferral [of premium payments]. It’s not to deny them. At the end of the day they’re going to get it. I spoke to several insurers yesterday [Tuesday] afternoon and evening, and said: ‘Come out with your best counter-proposal’.”
Mr Bethel said The Bahamas’ situation was no different from that of the US, where persons temporarily laid-off were wondering how to meet April’s mortgage and insurance payments. And, with increasing evidence that COVID-19 is being spread by persons showing no obvious symptoms, he added that allowing Bahamians to pay premiums in-person exposed them to potential danger.
“We open the doors,” he asserted. “The people involved in across-the-counter sales and payments are the poor and elderly. More and more is being known about how asymptomatic transmission occurs. We could not have a situation where the most vulnerable people are being forced into contact across cashier’s cages.
“If the insurance industry comes with a more reasonable counter-proposal, that’s fine. But we could not have a situation where people’s policies lapse because they cannot get into pay. We’re almost three weeks into it, and are starting to get to the point where people pay premiums at different times of the month.
“We’re running into a situation where people’s policies lapse. You think about someone paying on a home service policy for 20 years, and they’re now 80 or 90 years-old, and it lapses. Would they re-qualify? I’m not sure. To prevent a catastrophe, and protect the most vulnerable people in society, these are the steps we have taken,” Mr Bethel continued.
“Not to act in these circumstances would have allowed many policies of elderly and poor people to be lapsed with benefits losses to the poor. There are many elderly persons who have been paying premiums for many years who would never be able to qualify to restore a lapsed policy, thus losing all they paid over decades and losing their benefits.
“At the end of the day, we hope to have dialogue but in an emergency you have to act fast to protect life.”
That dialogue appears to have borne fruit, with the Government and life and health insurance industry seemingly reaching a compromise that achieves the former’s social protection objectives without destabilising a key economic sector.
The BIA’s Mr Morley, who is also BAF Financial’s managing director, told Tribune Business that the Government was expected to make the promised Order changes and release them within the next day or two.
“They have committed,” he said, confirming the industry’s information was the same as this newspaper’s. “We have been in discussion with them, both the industry and the Insurance Commission of The Bahamas, and we were happy those discussions have really progressed very well.
“The Government is appreciating that the Order initially issued is a bit onerous, so they are making the necessary changes. There are a number of moving parts. The implications would really have been the issue of having to absorb the cost of paying claims over the next 90 days without matching premiums. That clearly could have caused some cash flow issues.
“During that period we would have had to pay our reinsurance partners to retain the reinsurance relationship,” Mr Morley added. “There could have been some unintended consequences. The industry would clearly have had to adjust its operating model, and staffing levels.
“The impact could have been widespread with some unintended consequences the Government did not think through. The positive thing is that they listened, they were very responsive and we’re grateful the Government is operating in this manner where they’re entertaining some level of collaboration either on the front end or the back end.”
Reiterating the insurance industry’s desire to work with the Government, Mr Morley said the sector had also enlightened it on what it was doing to aid “clients not faring so well” to ensure their life and health coverage does not lapse.
“Our commitment is to continue to maintain policies during the Emergency Order,” he added, “as a lot of people will not have the capacity to access the online platform. We’re suspending termination of policies for the period and up to 14 days after the Order.
“Those corporate clients, the bigger groups, we’ll continue to engage them and look at ways to maintain cover for their staff. They’ve been clients for a number of years, and each insurer is committed to help them through this time.”