The onslaught of numerous natural disasters, as well as the crisis caused by the COVID-19 health crisis, will raise the price of insurance policies, mainly commercial and industrial ones, to increase in a wide range of between 15 percent to 50 percent, depending on the sector to which it belongs.
In an interview with THE WEEKLY JOURNAL, Javier Rivera Ríos, past insurance commissioner and now founder of JR Risk Management & Associates, indicated that, according to data from the Insurance Journal and some professionals in the reinsurance sector, the sectors that will experience more significant increases, with an average increase between 20 percent to 50 percent, will be companies with reasonable losses such as: hotels, shopping malls, hospitals, manufacturing, large restaurant chains, gasoline retailers, and any structure that is facing the sea.
Likewise, in general terms, the remaining sectors should experiment policy hikes between 12 percent and 20 percent.
In view of this trend, Rivera Ríos assured that this is the time to reassess the practice of automatically renewing policies, without there being a prior analysis of the type of risk of his company.
“Today, commercial policies are signed and the best price is sought, without knowing what the true needs of that business are. Property needs to be inspected, asset valuations, risk mitigation practices, and staff educated. When you have all this, at the end of the day the cost can be even lower, because you can renegotiate fees with reinsurers. Maybe at first the cost will be higher, but once they keep all these practices up to date, the cost continues to decrease,” he stated.
He also recognized that insurance brokers have the ability to do risk analysis, but they do not. He emphasized that not doing these risk analyzes and continually reviewing them is what allows them to be unable to do so when testing the loss. “If you have this analysis, the better the experience of claiming, otherwise we are blindly insuring.”
He stressed that after Hurricane Maria, the commercial and business sector in Puerto Rico faced the reality that their businesses and commercial properties were not prepared to face that event. In many cases, their insurance policies lacked appropriate covers to cover claims for damages and losses caused by the disaster. The vast majority of these companies did not have an emergency management plan in tune with the magnitude of the event, which led many to the brink of bankruptcy.
“The way in which risks are subscribed and managed in the business sector in Puerto Rico, must have a change, if this does not happen, definitely, no better results will be obtained,” the former insurance commissioner said.
Moreover, Rivera Ríos mentioned the arrival on the market of new insurance alternatives that adjust to new challenges, such as parametric covers, which allow the loss to be determined in advance, which speeds up payment in 10 to 15 days.