September 27th, 2021
Adaptable, Flexible, Stronger Than Ever
As a dynamic industry, we are continuously managing varying and evolving challenges and risks.
INTERVIEW – ASSOCIATION OF TRINIDAD AND TOBAGO INSURANCE COMPANIES (ATTIC)
Increasing motor vehicle fraud, soft insurance rates, low-interest rates and adjusting to a new Insurance Act are just some of the challenges facing local insurance companies. In addition, the blows dealt by the pandemic and related economic and business disruptions have left the local insurance industry “a bit bruised and battered,” says newly appointed President of the Association of Trinidad and Tobago Insurance Companies (ATTIC), Jason Clarke. But, he is confident that not only is the industry seeing the light at the end of the tunnel, but it will emerge stronger than before. Clarke took up the mantle of President in May 2021. In this Q&A in June, he gives ATTIC’s perspective on the industry.
How would you describe the last year for the insurance industry and was there any major challenges due to COVID-19?
Similar to that experienced by most sectors within Trinidad and Tobago, the last year has been arduous for our industry, inclusive of the 24 insurance companies represented by ATTIC. At the beginning of the COVID-19 pandemic, many of our members were confronted with a complex choice of ensuring continued service to customers whilst safeguarding the health, safety and well-being of employees. As an essential service, some of our members’ employees are on the front line.
Most members had to quickly transition processes and shift some operations to work-from-home models. We are proud of our members, as most were able to implement the necessary changes, adjust to the evolving economic climate, regulatory health protocols, and social distancing mandates. The adaptability and flexibility shown by our membership over the last year have thus far protected many jobs. It has also enabled members to ensure that they continue to satisfy their obligations to policyholders in as safe an environment as possible.
Outside of COVID-19, what are some of the biggest problems currently faced by the industry and what is being done to address them?
As a dynamic industry, we are continuously managing varying and evolving challenges and risks. For example, as the economy contracts, we are wary of increasing motor vehicle fraud and the filing of suspicious claims. Our members are also dependent on the conversion of local currency to fund their reinsurance programmes. This has become difficult to perform.
Insurance rates have been soft for more than 10 years, but it is now at an inflection point that unfortunately coincides with the local economic contraction and the pandemic. Interest rates on investments continue to be at historic lows whilst the local stock market declines. These present significant hurdles for members’ investment portfolios which in turn compromises their policyholders’ ability to meet their obligations. In addition to these, the industry also has to now manage the transition to a new Insurance Act, with new stringent requirements and reporting guidelines.
We have numerous initiatives that were implemented or are in train to assist in managing the challenges and risks of our members. We successfully worked with a number of our members to establish an Online Claims’ Bank. This enables each member to quickly validate an insurer’s claim history, to improve the underwriting of their risk. The data is also used for fraud detection. Other members are expected to join and share their data soon. ATTIC expects that within the next 12 months, all members will participate in the Claims Bank.
We are also part of a private-public initiative to facilitate members of the protective services and motor vehicle authority determining, in real time, if a motor vehicle has valid insurance coverage. Motorists will not be inconvenienced by having to provide ‘paper’ motor certificates when stopped, as validation will be facilitated via access to an online database of vehicles insured by members.
Will there be any shifting of coverage behaviours post-COVID-19?
We do expect some changes post-COVID. This will be due to the adverse economic impact the pandemic has had on local, regional and international economies. Very few countries were spared from an economic contraction in 2020. This may nudge individuals and commercial entities to examine their wallets and adjust spending patterns. For our industry, we may experience an increase in consumers shifting to lower-cost policies offering less protection. Alternatively, more consumers may opt to self-insure their property, which can lead to dire consequences.
What new ways of doing things will the industry implement permanently?
The pandemic has sped up the adoption of online services. Customers have shown increasing usage and confidence in online services and have embraced the ease and convenience of doing business online. Local employees and our members have had to transition to work from home programmes. Some employees prefer this option, and it is a trend we expect both parties will continue to use long after the economy is fully open for business.
What is your outlook for the industry in 2021/2022?
ATTIC is very optimistic. We are confident that our people and the industry will overcome this transitory phase. Going into the pandemic, most persons were overly optimistic that it would have been short-lived and now that we are still here, the pendulum has swung to many persons not seeing any light at the end of the tunnel. There is a light and we will come out the other side soon, a bit bruised and battered but certainly stronger.
The Insurance Act of 2018 and the Insurance (Amendment) Act, 2020
The insurance industry in Trinidad and Tobago is now being governed by new legislation.
The Insurance Act of 2018 and the Insurance (Amendment) Act, 2020 both came into effect on January 1, 2021, replacing the Insurance Act of 1980, which had been in effect for over 40 years.
According to ATTIC: “The Act is aligned with international best practices. It will also provide the tools needed to enable effective regulatory oversight and control. Risk-based measurements are employed, improving the capitalisation of insurance companies and offering additional protection to policyholders.”
Highlighting some of the key provisions, ATTIC noted that: “For insurance intermediaries i.e. agents, brokers, etc., Continuous Professional Development (CPD) is a new requirement. This ensures continuous annual training and development of those key persons who interface with policyholders and the public. It is now a mandatory requirement that they continuously update their skills.”
ATTIC also noted that: “Due to the increasing regulatory requirements, higher capitalisation and greater oversight, we may see some consolidation within the insurance industry. Insurers may be motivated to seek economies of scale to offset the increasing cost of operating under the new Act.”
According to a Central Bank overview, requirements under the new legislation include:
- A mandatory audit committee with at least two independent directors and segregation of duties – the appointed actuary cannot be the CEO or CFO
- Prohibition of directors from voting on contracts for which they have a conflict of interest
- Disallowance of bonus payments where an insurer does not meet the minimum capital requirements
- Restrictions on payments of dividends when the insurer is in financial difficulty
- Disallowance of bankrupts and persons involved in the management of a company that was insolvent in the last 10 years from being directors/officers unless expressly approved
- Transparent and clear marketing – insurers’ sales and marketing materials must be clear, fair, accurate and not misleading.
Article by: Kay Baldeosingh-Arjune