Cedric Stephens | Overcoming a bad reputation

ADVISORY COLUMN: RISKS & INSURANCE

Economist, lecturer, and fellow Gleaner columnist Mark Ricketts, in his April 28 article titled ‘Time to rethink economic implications’, describes the scary details of some of the hardships created by COVID-19.

He wrote: “Some business owners cited the inevitability of bankruptcy when just a few weeks earlier, they were talking about expansion and hiring additional workers. Others, bemoaning the absence of time to put their business in order, spoke about their inability to make redundancy payments to some of their most trustworthy and valuable workers … some employees despaired at the suddenness of this health-driven economic devastation … people are in tears, are hurt, sad, ensconced in their land of make-believe”.

That same narrative can be applied to thousands of residents of communities across the island. Their lives have been upended by fires, floods, and other unexpected disasters like medical emergencies. Many Puerto Ricans and Bahamians have lived through major crises like these.

Few persons have the financial or other resources to handle these events. Business operators and the others to whom Mr Ricketts referred occupy the same boat. Burial societies, which originated in ancient Rome and pre-dated what we now know as insurance, were invented to help individuals and businesses cope with many of these kinds of events.

Over the centuries, the practice of insurance has, to a large extent, evolved from the lofty ideals on which it was founded. It is mainly another business whose sole purpose is to make money.

Global institutions like the International Monetary Fund (IMF) sometimes act as an insurance company. They provide resources to governments like ours to limit the shocks to the economy caused by unexpected events. For example, the IMF recently provided our Government with US$520 million under what is called a Rapid Financing Instrument to lessen the economic impact of COVID-19. Funds from this instrument will be used, according to Finance Minister Dr Nigel Clarke, to “strengthen the reserves at the Bank of Jamaica” because “as of now, we do not need the financing facility for budgetary support. We are using our own cash resources and other programmed budgetary inflows,” he said.

What was significant to me is the negotiations for the funds appear to have been conducted quietly, quickly, without any fuss and were non-adversarial. Government and IMF officials appeared to have been working as partners to strike a deal. Are there any lessons to be learned by our commercial insurance companies?

Negotiations for the settlement of insurance claims to provide funds to recover from catastrophes are typically confrontational. This comment is based on the experiences of hundreds of claimants who have contacted me over two decades and were the subject of scores of articles. They are also founded on my recent interactions with the insurance system as I recorded on April 18 in my column ‘Close Encounters of the First Kind’.

Because of these dealings, many consumers have lost faith in insurance. Others consider insurance to be a necessary evil and a legalised scam.

The global pandemic, because of its widespread effects across all sectors of the economy and in Jamaica, has highlighted the need to prepare for disasters before they happen. Economists and IMF technocrats call this ex-ante financing.

COVID-19 has the potential to create significant business opportunities for those insurers who can see into the future and who develop and execute strategies to regain the trust and confidence of many persons who have lost faith in the industry.

The leaders of British Caribbean Insurance Company (BCIC) and Guardian General Insurance, based on their recent advertisements in this newspaper on May 22, have clearly recognis,ed the opportunities. Full disclosure: Guardian has been my insurer of choice for many years. I have also recommended this company to a few of my friends. I was a member of BCIC’s board during the 1990s.

BCIC, in a full-page spread, used less than 50 words to say that it was returning $50 million to policyholders from the premiums that it had collected in April. The company’s action is designed to show that it understands the difficulties that its consumers are facing. The ‘everything we do is for you’ motto echoes the grand ideals on which insurance was founded and is an excellent example of my April 12 piece, ‘COVID-induced Auto Premium Giveback’.

Guardian General ran what they called a special two-page advertising feature in the Financial Gleaner, which appeared the same day as BCIC’s.

The aim of their message was to show tangibly that the company cared and was looking beyond COVID. It was offering a package of benefits to existing and new policyholders and was offering a special deal to healthcare professionals. The content was helpful, showed empathy, was well-researched and not characterised by dense prose, which is often a feature of insurance communication. If I were not already a customer, I would have been persuaded to contact the company.

Bravo BCIC and Guardian General. Perhaps one or both of the leaders of these insurers can offer classes to the new head of the Insurance Association of Jamaica. The message that he crafted in an advertisement, in my humble opinion, offered no incentives to persons to read it. It was self-serving, boring, and failed spectacularly in burnishing the image and reputation of the industry. The ads from the two companies had the opposite effect.

Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com.