Trudy Simpson Staff ReporterTHE POOR state of the Jamaican economy is one of the central factors behind the low level of home insurance, according to experts in the field.
About 70 per cent of homes are not insured at a time when there are regular reports of fires, robberies and other perils.
"Despite the fact that there have been many fires in recent times, we have not seen a significant increase in homeowners insurances," said insurance operation manager at Jamaica General Insurance Company Jason Goldsmith.
Ruth Robinson, marketing manager at United General Insurance Company, said "people don't have the kind of disposable income that would stretch to insure their homes".
The significant drop in the number of persons insuring their homes dates back to the aftermath of Hurricane Gilbert in 1988. Since then, Mr. Goldsmith said, the figure had fallen from about 50 to 60 per cent being insured to between 25 and 30 per cent. This decline followed certain changes made by insurance companies which imposed a two per cent deductable sum in case of a natural disaster as well as an average clause, which demands a homeowner insure the building and contents for full replacement cost or at least 85 per cent of the actual replacement costs.
"With the advent of Hurricane Gilbert and the imposition of the average (clause) you now had to insure for a higher percentage of actual replacement costs and so, naturally, the premiums went up," said Mr. Goldsmith.
Homeowners are turned off by increasing premiums which cost far more than in the late 1980s. In fact, he pointed out rates have jumped from 35 cents per $100 for class one insurance in 1999 to 50 cents per $100 this year, so "the economic situation is still forcing people not to spend the dollar on insurance unless they really have to".
For example, in 1988, the replacement cost of a house could be valued at about $500,000 yet persons paid about $50,000 for insurance. The rates were low, he said, because before Gilbert, there was no reason for persons to want to look at their values.
"There was no real urgency because we had not had a hurricane since Charlie (1951) so when Gilbert occurred that $50,000 was still on the policy and because there was no average clause, most of those policies paid the full payment so that $50,000 insured got $50,000 for his $500,000 building. However, he was out of pocket by $450,000 and that spelled economic disaster."
Mr. Goldsmith explained, however, that persons were saved because there was more roof than building damage during the hurricane, which could be fixed for perhaps $100,000 so that $50,000 paid by insurance companies could help. Remittances or savings also helped soften the social and economic impact of Gilbert. But, he warned homeowners that "if people still remain or are reluctant to insure and we do have another disaster, it's going to have serious social devastation. Uninsured losses are going to be significant."
Apart from economic reasons, Ms. Robinson and Mr. Goldsmith said people were not insuring homes because they were already covered under mortgage schemes.
"We generally don't give them a choice," explained Saneth White, loans officer at Victoria Mutual Building Society. "It's usually built into the mortgage or they pay us separately. There are times when we even advance insurance to them and they pay us back monthly."
In addition, some homeowners believe they should be allowed to insure only specific parts of their houses like the roof and pay a reduced premium, Mr. Goldsmith said. He said insurance agents rejected these claims because writing up a policy to cover a part of the house could cost roughly the same as writing a policy to cover the entire house.
