Cedric E. Stephens | Why are so many Jamaicans uninsured? Can anything be done about it?

Last week, we examined one of the most important lessons from Hurricane Melissa. The storm damaged homes, businesses, infrastructure and livelihoods on a scale never seen in Jamaica. According to a joint assessment by the Inter-American Development Bank and the Economic Commission for Latin America and the Caribbean, losses reached historic levels of J$1.95 trillion (US$12.2 billion), or four times more than the cost of Hurricane Gilbert. Disasters are becoming increasingly frequent and costly.

Yet in a country exposed to hurricanes, floods, landslides and earthquakes, a troubling question remains: Why are so many Jamaicans still uninsured? The easy answer is that insurance is expensive. The honest answer is more complicated. The gap between Jamaicans and insurance protection is built on four powerful foundations: affordability, misunderstanding, mistrust and competing priorities. Unless we tackle all four, the country’s protection gap will remain stubbornly wide.

THE AFFORDABILITY PROBLEM

Let us begin with what many readers are thinking. “Cedric, insurance sounds good, but have you seen the cost of living lately?” It is a fair question. Food, electricity, transportation and school expenses continue to rise. Many families are struggling to stretch a dollar. In this environment, insurance is often overlooked. Not because people do not understand risk or act irresponsibly. But because there always seems to be a more urgent bill: mortgage, rent, schoolbooks and fees, transportation, or unexpected medical expenses. For some households, insurance is seen as desirable but not immediately affordable. Consumers should not be criticised for acknowledging this reality.

At the same time, however, there is another truth we should confront. Many Jamaicans routinely invest in improving their residences. A room added, a verandah enclosed, a kitchen upgraded or a roof repaired.

In Portland, St Elizabeth, Clarendon, Manchester, Kingston & St Andrew, and all the other parishes, countless homeowners have spent years building houses piece by piece through sacrifice and hard work. The question is not whether those homes have value. The question is whether they are protected.

A house may represent 20 years of effort. A hurricane can undo much of it in a single night if it is not built properly or sited in an unsafe area.

MOST MOTORISTS INSURE

Most vehicle owners carry insurance because they must. If motor insurance suddenly became optional tomorrow, how many people would continue paying for it? The answer may make some people uncomfortable.

Many Jamaicans see insurance not as a protection tool, but as a legal obligation. That mindset may work for motor vehicles. It becomes dangerous when applied to homes, their contents and businesses.

The homeowner in Black River whose roof was blown away by a hurricane. The shop owner in May Pen or Spanish Town whose stock is ruined by floodwaters. The returning resident who invested life savings in a retirement home in Mandeville or on the coast. None of them care whether insurance was legally required after disaster strikes. They care whether recovery is possible.

‘INSURANCE COMPANIES NEVER PAY’

No statement is repeated more often. Everybody knows someone with a bad insurance story. A claim that took too long. A dispute over documentation. A settlement that was smaller than expected.

These stories matter because trust matters. The insurance industry should never dismiss them. Trust is earned one policy, one claim, and one customer at a time. Consumers have every right to expect certainty, fairness, professionalism and speedy claims settlement.

Melissa has shown that successive governments have been doing an extremely poor job of regulating the industry.

Another side of the story also deserves attention. Many claim disputes begin long before a disaster occurs. They begin when a policy is purchased and not fully understood. The consumer believes one thing. The contract says another. Months or years later, the disagreement emerges. Nobody is happy.

READ THE FINE PRINT

Most people spend more time researching new cell phones (a product) than studying an insurance policy (a service). We focus only on the premium. How much will it cost?

Several other questions matter just as much. What exactly is covered? What is excluded? Does a deductible or excess apply? How will a claim be calculated? What documents will be required to prove a loss?

Insurance buyers hope never to use the protection. That may explain why so many people know surprisingly little about what they purchased. Yet, understanding these details before a loss occurs can prevent disappointment later.

UNDERINSURANCE DANGERS

One of the least understood things about insurance in Jamaica may be underinsurance.

Imagine a family home in Mandeville. Years ago, the owners insured it for $12 million. Over time, construction costs rose dramatically. Today, the cost of rebuilding it is $25 million. However, nobody increased the sum insured.

The owners believe they are protected because they have insurance. The protection may be far less than they expect.

This problem is more common than many people realise. The issue is not having insurance. The issue is having enough insurance. A disaster is a tough time to discover that something valuable was worth far more than the amount for which it was insured.

INSURANCE IS NOT A MAGIC BULLET

Some consumers expect insurance to eliminate every consequence of a disaster. That is an unrealistic expectation.

Insurance cannot erase emotional trauma. It cannot replace cherished family memories. It cannot restore the months of inconvenience that often accompany major repairs.

What it can do is provide financial support when it is needed most.

Think about a small supermarket owner whose stock is destroyed. Or a taxi operator whose vehicle is damaged. Or a family forced to relocate temporarily after severe storm damage.

Insurance cannot prevent these hardships. But it can make recovery faster and more manageable. That is its purpose. Not perfection. Recovery.

INSURERS MUST TAKE A HARD LOOK IN THE MIRROR

Consumers are not the only ones with responsibilities. The insurance industry has work to do as well.

Policies should be easier to understand. Employees should be professionally trained. Contract jargon should be reduced. Product information should be communicated in plain language before consumers sign on the dotted line.

Consumers should have a clear understanding of what they are buying and why.

The industry must also continue exploring innovative products that provide meaningful protection at different price points. The challenge is finding ways to reach households and small businesses that remain highly vulnerable.

The question should not simply be: ‘What can we sell?’ It should also be: ‘What protection can ordinary Jamaicans realistically afford? How can we improve our services to customers?’

The more questions like these are asked and honestly answered, the narrower the protection gap becomes.

SHARED RESPONSIBILITY

Too often, discussions about insurance become arguments. Consumers blame insurers. Insurers blame consumers. Neither approach solves the problem.

The reality is that both sides need each other. Consumers need protection against financial shocks that could erase years of demanding work. Insurers need customers who understand the value of protection and trust the promises being made.

Government and regulators also have important roles in creating an environment that encourages financial resilience.

This is not a battle. It is a business partnership.

Unfortunately, based on their responses to customer complaints about the Melissa claims backlog, some insurers have still not got the message!

THE REAL LESSON

Hurricane Melissa exposed more than damaged buildings and broken roads. It exposed financial vulnerability.

The lesson is not that every Jamaican should rush out tomorrow and buy the biggest insurance policy available. That is neither practical nor realistic.

The lesson is simpler. Every family should understand its risks. Every family should have a recovery plan. Every family should ask a difficult but necessary question: “If a hurricane, flood, fire or earthquake strikes tomorrow, where would the recovery money come from?”

Insurance may not be the entire answer. Savings matter. Preparedness matters. Building standards matter. Personal responsibility matters.

But in a country facing increasingly intense weather events and ever-present earthquake risk, insurance remains an important part of the conversation.

The next disaster will not ask whether we trust insurance companies. It will not ask whether premiums were affordable. It will not ask whether we intend to prepare later. It will simply reveal whether we were prepared.

And that is the greatest lesson Hurricane Melissa has left behind.

Cedric E. Stephens offers free counsel and independent advice. He does not own shares in any insurance company or intermediary. If you require assistance managing risks or solving insurance problems, please write to The Business Editor at business@gleanerjm.com or contact Mr Stephens directly at aegisja@gmail.com. Letters and e-mails will be edited for clarity and length.