Cedric Stephens | Managing risk through literacy

In 1972, according to the world’s most popular search engine, the National Literacy Board. NLB, was set up to eradicate illiteracy in Jamaica within four years.

Two years later, the NLB was restructured and the programme renamed – or rebranded, to use the 21st-century verbiage – the Jamaican Movement for the Advancement of Literacy Limited, known as JAMAL. That entity did not achieve its goal.

Thirty-two years later, a Jamaica Observer reporter, Patrick Foster, wrote that “the movement, established with great fanfare by late Prime Minister Michael Manley to abolish adult illiteracy, has been dissolved. It was replaced by the Jamaican Foundation for Life-long Learning. JAMAL, he stated, gave way to a more modern approach to learning. JAMAL’s logo, the kitchen bitch, popularly known as the tinnin’ lamp (it provided night-time lighting before electricity was commonplace), is likely to be replaced by the computer keyboard.”

One of the unspoken ideas for the second rebranding, I believe, was to find a neutral word for illiteracy (which became darkness, as its ‘into the light’ motto implied) that would encourage, not alienate, JAMAL’s target group.

Because of the enslavement and post-colonial experiences of our ancestors and how JAMAL was quietly exiled, I had mixed feelings about the UWI Mona School of Business and Management senior lecturer Lawrence Nicholson’s piece on family-owned businesses and financial literacy last Wednesday.

He led a group in 2012 that conducted a national baseline study on behalf of the Financial Services Commission. The FSC regulates non-bank deposit-taking institutions like insurance companies. The survey measured the level of financial literacy of Jamaicans.

Dr Nicholson defined financial literacy as managing ‘money wisely to maximise returns’. I would expand his definition to include using insurance to manage risks. The survey found that less than 50 per cent of the persons surveyed were financially literate. Expressed differently, most persons interviewed did not have the skills to make financial decisions.

The survey findings are worrying. From my interactions with insurance consumers, the situation has not improved over the past 11 years. Dr Nicholson commends the FSC for its ‘continued efforts in educating various groups in financial literacy’, none of which he identified.

From my on-the-ground experience, those efforts excluded insurance consumers, as the information I shared last week about the Insurance (Amendment) Regulations, 2022 and the precursor rules show. Also, employee training, consumer education, and engagement are not essential elements of the insurance industry’s development strategy.

Why has the regulator been so tardy in using the data from its 2012 baseline study to inform its actions?

Dr Nicholson and I are on the same page about the benefits of financial literacy in family-owned and other businesses, even though he omitted one: the critical function of managing risks. Given the FSC’s mission, as described in Section 6 of its enabling legislation, the marketplace dysfunctions, and low levels of financial literacy, shouldn’t the FSC play a more active role in helping society manage its many risks? Its Indonesian counterpart, the Financial Services Authority, is promoting the introduction of “mandated” or compulsory insurance policies for large gatherings involving many people, such as football matches. The authority’s CEO argues that mandatory coverage would protect the public in the event of accidents.

The New York Times reported on October 18, 1976 that ‘five children were killed and at least 100 persons injured in Kingston’s national sports stadium when a tropical downpour sent a 30,000-crowd stampeding for the exits. The downpour burst on the stadium minutes before a festival involving 5,000 performers was due to begin to mark Jamaica’s National Heroes Day”. Have we learned from that event and put the necessary measures in place to prevent a recurrence of that accident? More broadly, is compulsory third-party liability insurance now an essential requirement to obtain a police permit to host a large public event if something untoward happens? Would such a requirement be consistent with public policy in the same way third-party motor insurance using public roads or the insurance of strata lots is compulsory?

If the 2030 vision articulated in the country’s National Development Plan is to be realised, financial inclusion – my preferred term – must quickly move from the Stygian gloom into the light.

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 or business@gleanerjm.com