Growth & Jobs | Demand for insurance increases
The ongoing push to improve lifestyles and build businesses is driving growth in the insurance premium financing market, says Sharon Smith, head, JN Retirement Scheme & Insurance Premium Financing, JN Bank.
Increasing car ownership and expansion in the real estate sector, as well as overall business activities are major factors behind an increase in demand for insurance, Smith said. Third-party financial service providers are targeting this market, measured at J$43 billion in premiums paid to insurers in 2017.
“Insurance-premium financing is making it easier to access insurance for assets,” Smith said. “By spreading premium payments from one lump sum, to smaller payments over as much as nine months, the necessary insurance component of these transactions becomes more affordable.”
She explained that securing premium financing loans is generally easy for consumers, particularly for motor insurance, as the insurance policy agreement loans serve as the basis of the loan.
“This has become a multi-billion dollar business, and several institutions have started providing insurance-premium financing,” she said. “At JN Bank, we have ramped up this service and expect to see significant growth in 2019.”
Orville Johnson, executive director of the Insurance Association of Jamaica, pointed out that the insurance premium market amounted to approximately $36 billion for the January to September period of 2018. This was an increase of 11.2 per cent increase over the equivalent prior period.
“Insurance-premium financing is growing in this market as it allows purchasers to incorporate premium payments in their budgets comfortably,” Johnson explained. “Currently, low interest rates and the lengthened repayment period increase the convenience and improve the affordability of paying the premium.”
He noted that credit unions and commercial banks are playing an increasingly active role in the market, helped by the fact that they are aggressively pursuing the financing of motor vehicle purchases. With motor insurance premiums amounting to $15.2 billion for the January to September period of 2018, this was the single largest element of the insurance premium market.
“Premium financing is readily available, however, many people are not aware of it,” he said. “Therefore, the industry needs to do a better job to promote it.”
Chris Hind, general manager of JN General Insurance Company, explained that “insurance-premium finance companies are important enablers for the insurance industry. By easing the immediate burden of premium payment, they help to increase demand for the product.”
He pointed out that, “industry revenues are growing healthily in the positive economic environment the country is now experiencing. In addition, growth is taking place in sectors such as tourism, which rely on insurance to reduce risk exposure.”
“There is growth in the insurance market, and premium financing is boosting that expansion,” Hind said. “Jamaica’s economic security requires a greater level of insurance coverage, and we see this emerging sector as our partner in helping to achieve this.”