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Insurers’ Anger At Premiums ‘Holiday’


Tribune Business Editor

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.

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