With AIG departure, broker may abandon failed wind-free peril policy
Progressive Insurance Brokers Limited is likely to abandon a relatively new line of business started in partnership with AIG Jamaica over a year ago, says Chief Executive Officer Gabriel Alexander.
Poor take-up of the uniquely designed peril policy has been compounded by AIG's planned exit from the Jamaican market.
Back in November 2013, the two companies - Progressive as the seller of the policy and AIG Jamaica as insurer - announced they would be partnering on a product that insured against major perils such as, fire, lightning, bush fires caused by spontaneous combustion, volcanic eruption, subterranean fire, explosion, earthquake, hail, flood, riot, strike, civil commotion, malicious damage, aircraft damage, impact damage, bursting of pipes and the overflow of water tanks, burglary, and theft.
However, it did not cover wind-related events such as hurricane, windstorm, storm tempest, cyclone or tornado, nor any flooding resulting from those events.
Having eliminated those risks, the partners said premiums would have been about half the cost of other peril coverage in the market. The policy was targeted at homeowners with solid, well-anchored slab roofs.
Since its debut 16 months ago, the wind-free peril policy has received just $500,000 of subscriptions, Alexander told Wednesday Business. Take-up was limited, he said, because local mortgage providers refused to allow policyholders to change coverage from full peril insurance to the limited peril policy. And, premiums for peril coverage have been falling, which means that home -owners have no particular need to seek out bargains.
Alexander links falling rates, to a "soft market" driven by the absence of substantial regional storm events in recent years, in addition to new investments and more competition in the insurance sector.
"Basically, we will just have to abandon it. Fortunately, it was not much," he said of the business line. "We could not convince the mortgage companies it was a good thing for their customers, and even if they did buy the policy, the excess that was imposed was more than the probable damage anyway," said Alexander.
"There is a two per cent deductible for wind-related damage. So if your house was insured for $10 million, you had to have damage in excess of $200,000 to claim. With a slab roof, it was very unlikely you would have more than $200,000 damage. I don't think they really grasped the risk situation," he said.
AIG said from its regional Miami office that policyholders have been given 60 days' notice prior to the expiration of individual policies "advising them to contact another insurance company or broker".
Progressive is now searching for a new carrier for the policy after AIG Jamaica stopped writing some business in January. Eventually, the remaining business - government and multinational contracts - will be taken over by AIG Jamaica's sister company AHAC and managed by another company resident elsewhere in the Caribbean. AIG's exit from Jamaica is expected to be finalised by 2016.
"We are trying to place [policyholders] with a no-wind company at competitive cover," said Alexander.