There is one statistic about Jamaica’s housing market that should stop homeowners, policymakers and insurers in their tracks. Only about 20 per cent of residential properties in Jamaica are insured. That alone would be troubling for a country exposed to hurricanes, flooding, earthquakes, fires and other natural hazards. But the second number is even more uncomfortable. According to estimates cited by the Insurance Association of Jamaica, approximately 95 per cent of those insured properties are underinsured.
Put those two figures together and the scale of the problem becomes extraordinary. If only 20 per cent of homes are insured, and only about 5 per cent of that insured group has adequate coverage, the arithmetic suggests that roughly one per cent of Jamaica’s residential properties may be adequately insured. That is not an official IAJ statistic. It is a simple calculation based on the association’s estimates. But it translates into something much easier to understand: potentially only around one home in every hundred is properly insured.
One in a hundred.
For a country still counting the cost of Hurricane Melissa, that should trigger a much bigger national conversation. The conventional explanation is often that Jamaicans do not understand insurance, do not prioritise it, or simply cannot afford it. All three factors undoubtedly play a part. But there is another question that deserves equal attention. Does the insurance product itself inspire enough confidence among Jamaican homeowners?
“Insurance is supposed to transfer risk, but from the homeowner’s perspective the calculation can feel more complicated,” says Dean Jones, director of Jamaica Homes. “A household may pay premiums year after year, carry a significant deductible, remain responsible for ensuring the property is correctly valued, and then discover after a disaster that underinsurance has reduced the claim. That is a difficult product to sell unless people deeply trust how it will work when they need it.”
Consider the hurricane deductible, commonly called the excess. For Jamaican property insurance, a catastrophe deductible of around two per cent of the sum insured is commonly applied to hurricane-related losses. That sounds small until it is converted into dollars. Take a house insured for J$30 million. Two per cent is J$600,000. That means the homeowner can effectively be carrying the first J$600,000 of a qualifying hurricane loss, depending on the terms of the policy.
A family could therefore suffer serious storm damage while discovering that a sizeable portion of the initial financial burden still sits with them. Then comes underinsurance. If the property would actually cost J$40 million to rebuild but is insured for substantially less, the payout for a partial claim can be reduced under what is commonly known as the average clause. This is why the distinction between market value and replacement value matters. The figure written on a property insurance policy is not simply what somebody believes the house could sell for. Construction costs move. Labour costs move. Materials move. Extensions are built, kitchens replaced, additional bedrooms added and roofs upgraded, yet the insurance value can remain sitting where it was five or ten years earlier.
“Some homeowners may believe that because they have an insurance certificate they are protected,” Jones says. “But being insured and being adequately insured are two very different things. The real test comes when somebody has to rebuild a roof, a kitchen or an entire house at today’s prices.”
Hurricane Melissa turned what could have remained an obscure discussion about insurance clauses into a national issue. Nearly a year after the hurricane, some policyholders are still waiting for claims to be resolved. Individual insurers have reported significant progress, and it is important to recognise that a Category 5 hurricane inevitably creates an enormous administrative burden. Loss adjusters have to inspect properties, documents must be supplied, reinsurers become involved and complex commercial losses can take time to quantify. Not every delayed claim is evidence that an insurer has behaved improperly.
But when policyholders are still waiting many months after a disaster, speed becomes more than a customer-service issue. The concern became serious enough for Prime Minister Andrew Holness to publicly call on insurers to accelerate claims settlements, while the Financial Services Commission has also stressed the need for policyholders to be treated fairly, transparently and without avoidable delay.
For the homeowner standing beneath a tarpaulin, waiting to rebuild, insurance is not an accounting exercise. It is supposed to be the recovery plan.
That brings the discussion back to the 80 per cent of Jamaican homes that are estimated to be uninsured. The easy answer would be affordability. Insurance premiums compete with mortgages, electricity bills, food, school expenses, transportation and every other demand on household income. But price alone may not explain the depth of Jamaica’s protection gap.
Trust matters too.
A homeowner considering insurance is effectively being asked to make a long-term financial promise: pay the premium every year, keep the rebuilding value updated, understand the exclusions, understand the excess, understand the average clause, keep the documentation, and then, if catastrophe comes, submit the claim and trust that the system will deliver.
That bargain only works when consumers believe the eventual benefit justifies the immediate cost.
“Jamaica needs more people insured, not fewer,” Jones says. “But telling homeowners to buy insurance cannot be the entire strategy. The industry also has to make the product easier to understand, quicker to respond and easier for ordinary Jamaicans to trust. Insurance depends on mathematics, but confidence cannot be calculated on a spreadsheet.”
There is also a strong argument that homeowners themselves need to take greater responsibility. A policy cannot work properly if a J$40-million rebuilding risk is insured for J$20 million. Property owners should review rebuilding values regularly, disclose additions and renovations, understand deductibles before purchasing policies and ask insurers or brokers to explain exactly how a major claim would be calculated.
The solution, therefore, cannot become a simple contest between insurers and consumers. Jamaica needs both sides of the relationship to work better. Insurers need efficient claims systems, transparent communication and products ordinary homeowners can understand. Consumers need accurate valuations, adequate coverage and a better understanding of what they are purchasing. Government and regulators need reliable industry-wide claims data so the public can see how quickly catastrophic claims are actually being settled.
And the country needs to confront the uncomfortable scale of the insurance gap. If the IAJ estimates are even broadly accurate, Jamaica does not merely have an underinsurance problem. It has a resilience problem.
After every major hurricane, billions of dollars will be required to rebuild homes, businesses and communities. Where insurance is absent or inadequate, much of that burden falls back on families, banks, government and ultimately taxpayers.
The question therefore should not simply be why the other 80 per cent of Jamaican homeowners are not buying insurance. A better question is what the insurance industry has done, and still needs to do, to make more Jamaicans trust the product.
Because insurance exists to manage risk.
But insurance in Jamaica also has a trust problem.
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