The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading insurer yesterday said it is “taking a very close look” at its motor portfolio, which is suffering from a “squeeze” that has driven loss ratios 4-5 per cent above their historical average.

Tim Duff, Insurance Company of the Bahamas (ICB) general manager, told Tribune Business that a combination of reduced premium income and increased claims activity was threatening a historic profit driver for the property and casualty underwriter.

He added that one factor driving increased motor vehicle claims was “more aggressive demands” from attorneys representing accident victims.

And, while “not an epidemic”, Mr Duff said ICB had seen some evidence of an increase in fraudulent vehicle claims - an unfortunate, but typical, trend in struggling economies.

“One of the things we’re looking at closely is our motor loss ratio, which we’ve seen a bit of deterioration in over the last 18 months to two years,” the ICB general manager told Tribune Business.

“There are a couple of factors. Premiums are being squeezed. Because of the tight economy, people are holding off replacing their motor vehicles. The value of those cars is dropping, and so the value of the premium is dropping.”

“You then have the whole issue of what’s happening in a tight economy,” Mr Duff added. “You’ll have more claims for motor theft, more fraudulent claims.

“Those types of claims are more likely in a challenged economy. We’ve not seen an epidemic, but there’s evidence of additional fraudulent claims.”

Apart from this trend, MR Duff said ICB was also having to cope with increased demands from accident victims and their attorneys.

“We’re seeing more evidence of third parties’ attorneys being more aggressive with their demands, and we’re having to work harder to resolve some of these claims,” he told Tribune Business.

“It’s an example of how loss ratios are being squeezed from the top at the premium level, and from the bottom by insurance claims activity and demands from third parties.

“It’s something we’re working on closely with our agents, and being very diligent with our underwriting,” Mr Duff added.

“We’ve certainly seen over the last few years that the motor loss ratio is four to five points above the historical average. It’s up there.

“It’s at the stage where we have to look at it very closely, as the motor account has been very important to our profitability over the years.”

Mr Duff described ICB’s gross premium income, which remained relatively flat year-over-year at $45.381 million compared to $45.778 million in 2013, as “one downside” to the underwriter’s 2014 financial performance.

He added that this “doesn’t really surprise us”, given that last year had been “fairly difficult”.

Mr Duff, though, said ICB’s marine account had generated increased profits in 2015 despite a 6.5 per cent decline in premium income.

Blaming this on reduced cargo activity, where ICB had limited its involvement, Mr Duff said the carrier’s hull account had ensured underwriting results were 50 per cent better than in 2013.

“Our marine account has been growing rather well over the years,” he told Tribune Business. “It’s been pretty profitable.

“It fell last year, 6.5 percentage points on the top-line, but profitability was up. The main reason for the drop in income was on the cargo side.

“We did not see so much cargo come through, and limited clients there.”

However, Mr Duff added: “The hull account has been doing well, and the underwriting result was 50 per cent better than the year before. It’s a small account, so you do get little blips, up and down.”

Mr Duff said that, traditionally, ICB’s marine account had been written to support its two main business lines - property and motor.

Writing in ICB’s annual report, he added: “ICB’s operating expenses were once again well contained during the year, ending at only 0.25 per cent higher than in 2013.

“This was nine percentage points inside Budget. Investment income rose by 5.3 per cent over 2013 but suffered as a consequence of the low fixed deposit rates available during the year.”