Cedric Stephens | Jamaica needs an inclusive insurance system

Today’s essay is my response to the Jamaica Observer’s July 23 article, ‘Looming crisis: 80 per cent without pensions, 70 per cent uninsured, industry demands tax breaks, micro schemes to incentivise saving’.

That reporting was the product of that newspaper’s event last Monday which was attended by insurance and pension industries representatives and the Insurance Association of Jamaica’s new head. Neither the reporter nor the attendees seem to have read my July 20 Sunday Gleaner article – ‘Better engagement needed on risks and insurance’ – or if they read it, did not see its relevance to the event they attended the next day.

For those who may not have read my article, it was about the IAJ’s plan to launch a new public education campaign urging property owners to urgently reassess their insurance coverage during the current hurricane season. Implementing that idea, I argued, should be part of a broader effort of public engagement in the context of climate change, trust and affordability issues, among others.

The prime minister and agencies like the International Monetary Fund and World Bank often speak about strengthening Jamaica’s resilience framework to protect the economy and its citizens against the effects of shocks. This is important given the island’s vulnerability to natural disasters.

Non-insurance and underinsurance weaken economic recovery efforts. Hazards posed by climate change, which United Nations’ International Court of Justice says are ‘urgent and existential to countries, which are at the greatest risk of harm’. Impacts of this extend beyond property insurance. It also affects mortality, and morbidity risks and creates underwriting, pricing, and other challenges to life and health insurers.

Today’s article will summarise the wish list of the industries in the Observer article and explain why that prescription is not enough to fix the symptoms of the problems that were identified during earlier PR events.

Industry wish list

• Financial incentives and tax benefits for insurance and pension scheme buyers;

• The creation of a framework that encourages people to save, especially through insurance;

• Savings schemes linked directly to insurance products, making it easier to build financial protection over time; and

• Microinsurance legislation which will allow for Jamaicans who are not part of the formal workforce to have opportunities to join approved insurance and pension schemes.

This column does not agree that the granting of financial incentives by the government will significantly increase the uptake of insurance and pension products in an economy where the penetration rate for financial products has been historically low. Example: The industry’s life insurance segment introduced equity-linked products some years ago. The promised investment returns were not realised and, as a result, there was widespread dissatisfaction.

Will incentives alone overcome entrenched issues such as distrust in institutions and financial institutions in particular, poor customer experiences, especially with claims, low levels of literacy generally and insurance literacy, and a five decade-old regulatory framework that was recently tarnished by the SSL melt down and, before that, the near collapse of the financial sector?

Additionally, the regulatory doctrine is still focused primarily on compliance with solvency ratios.

While premium subsidies and tax relief can improve affordability in the short term, they do not repair the deeper fissures that undermine consumer engagement, as was discussed in last Sunday’s article. Without parallel efforts in product relevance, service improvements, standards, transparency, and education, incentives may serve as expensive band-aids rather than structural solutions and end up benefiting the more financially literate.

Countries in Africa have embraced bundled insurance, embedding coverage into agricultural inputs. Parametric models and mobile claims have restored trust, with payout times dropping from weeks to mere hours.

Asian nations leveraged embedded insurance in digital services, making coverage seamless within ride-hailing and e-commerce platforms. Regulatory reforms supported innovation in microinsurance and digital distribution.

Latin American countries have focused on ecosystem partnerships and hybrid digital-human journeys. Fintechs, cooperatives, and insurers worked together to deliver personalised protection, driving retention and profitability.

Each region proves that relevance, trust, and service excellence matter as much, or more, than price reductions.

Penetration resilience index

Life insurance companies have traditionally bench-marked their performance by the number of their sales staff who have met membership criteria of the US-based Million Dollar Roundtable. This yardstick measures sales performance and is not an indicator of customer service excellence or company performance.

Likewise, some non-life insurers post photos of customer service excellence awards on their websites, social media accounts or traditional media sans vital details about policy outcomes.

Are these examples of public recognition appropriate for a mid-level developing economy with low rates of literacy and numeracy and marginal insurance penetration?

To measure insurance company performance, I propose a ‘penetration resilience index’ that goes beyond policy counts and is more appropriate for local conditions. It would include:

• Claims settlement efficiency;

• Renewal and lapse rates;

• Insurance literacy and engagement benchmarks;

• Complaint resolution outcomes;

• Customer feedback; and

• Consumer confidence metrics.

This index would shift focus from short-term initiatives designed to increase sales and executive management performance bonuses to creating sustainable shareholders’ value and enhance national resilience. Regulatory reform embracing consumer protection would also be part of the package.

Incentives and tax breaks alone will not build an inclusive insurance system that contributes to Jamaica’s economic development and promote resilience. Jamaica needs a resilience-focused approach grounded in relevance, trust, and consumer empowerment.

Section 6(1)(e) of the Financial Services Commission Act 2001, clearly describes the vision and functions of the industry regulator and its risk-bearing enterprises: entities that adopt and maintain international standards of competence, efficiency, and competitiveness.

There are global models; it is time we apply them with bold vision and local insights. Attempts were made last week to get comments for this article from three industry representatives but were unsuccessful. Feedback is still welcome.

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