Hurricane Paloma damage
Although the figures are not yet definite, many Cayman Brac homeowners appear to be either uninsured or underinsured for property damage caused by Hurricane Paloma.
Cayman Brac and Little Cayman MLA Moses Kirkconnell agreed that 40 per cent of the dwellings on Cayman Brac – which he estimated to be between 1,400 and 1,500 in number – could be uninsured.
Island Heritage Insurance Company Claims and Compliance Manager Gerard Mendez said the percentage could be even higher.
Mr. Mendez said a disaster committee is conducting a survey on the Sister Islands, which would give an accurate number of buildings and the number and value of the risks underwritten there.
‘When that information comes in, I’ll be better able to comment,’ he said. ‘In the interim, the speculative figure of 1,200 to 1,300 buildings and the suspicion of 40 to 60 per cent of them being uninsured in not entirely unreasonable and may be very much in the ballpark.’
Mr. Kirkconnell said the cases of uninsured and underinsured homes were a result of the economy and the rise in insurance premiums and that the problem isn’t unique to Cayman Brac and Little Cayman.
‘I think this is happening throughout the free world, in any place that has suffered from the tremendous rise in insurance rates,’ he said.
Mr. Kirkconnell said the average per capita income on Cayman Brac is half of what it is on Grand Cayman.
Because of their economic situation, many Brackers had to accept the fact they were self-insured or that they were underinsured. Those that are underinsured will find their claims subject to averaging.
With averaging, a claimant’s final settlement is only equal to the same ratio of insured value to property value, minus the applicable deductible. Thus, if a policyholder only insured a property with a replacement value of $200,000 for $100,000, then only half of the loss adjusted settlement would be due after deductible. If there was $50,000 worth of damage to that property and the deductible was $5,000, then the claimant in such a case would only receive a final settlement of $20,000.
Mr. Kirkconnell has an ownership interest in Brac Insurance, which represents Sagicor on Cayman Brac. He said policyholders were made aware if their insurance wasn’t adequate, but some people simply couldn’t afford the full premiums.
‘They were consciously underinsured,’ he said.
Speaking as an MLA and not an insurer, Mr. Kirkconnell said the same rules that applied to those that were uninsured on Grand Cayman after Hurricane Ivan in 2004 would apply to those underinsured on Cayman Brac and Little Cayman after Hurricane Paloma.
The number of uninsured property owners is not yet known. Sagicor General Insurance Senior Vice President Michael Gayle said the first step of the claim resolution process was simply to establish contact with claimants and to advise them how to proceed.
‘The assessment of adequacy of insurance coverage will typically be done in the second phase of the process,’ he said. ‘Having said that, I myself have been on the Brac and I have observed cases of adequate insurance and cases of underinsurance, but we do not yet have a feel for the extent.’
Mr. Gayle said policyholders are typically advised of the need to insure to full values, and the possible consequences of underinsurance.
‘Unfortunately, when faced with a finite income and increasing cost of living, individuals are sometimes forced to make choices and historically insurance is one of the first areas where cutbacks are made.’
Loss adjustors warning
The day after the All-Clear was given after Hurricane Paloma’s passing in the Sister Islands, the Hazard Management Cayman Islands’ Joint Communication Service issued a bulletin to insurance policyholders in the Sister Islands.
‘Insurance adjustors assess damage and assign value to it, considering the terms and conditions of the insurance policy,’ the bulletin stated. ‘Residents need to know that they do not have to sign any agreement quickly. Also, they are entitled to seek a second opinion if they don’t agree with the assessed value.’
Mr. Gayle said Sagicor endorsed the government’s comments about not being pressured into accepting lowball offers.
‘We have specifically instructed our adjustors to seek to make fair settlements to all claimants, within the terms of the policy,’ Mr. Gayle said. ‘We have told them that their mandate is to arrive at the fairest possible settlement in the circumstances, rather than to simply seek to reduce people’s claims.
‘For example, we told them that there may be cases where the adjusters observe damage that the claimant has overlooked and in such cases, they have been told to bring this to the claimant’s attention so that it can be included in the claim.’
Sagicor has two sets of loss adjustors in Cayman Brac, including teams from Axis Loss Adjustors and Cunningham Lindsay.
Mr. Gayle said claimants are typically asked to provide an estimate for repairs, but that in some cases, loss adjustors may be able to negotiate a settlement on the spot.
‘But in anything other than small claims, this can lead to claimable damage not being revealed until after the claim has been settled and repairs are actually started, and, as such, should only be done in clear cut circumstances.’
Professional advice
As for getting a second opinion on a claim offer, that could come from a firm that offers quantity surveying services. Although QS staff often assist loss adjustors, especially those coming from outside of the jurisdiction, by quantifying replacement costs, they can also assist individual policyholders.
Brian Eccles, managing director DLL Studio, a firm that provides quantity surveyor services, said a QS could not only accurately quantify a claim, he could prepare the paperwork and negotiate with the loss adjustor.
‘We can speak their language and we have the knowledge to say ‘no, sir, you’re completely wrong’ if figures are not accurate,’ he said.
In addition, a QS could point out items to add to a claim like the cost for alternative accommodations or professional fees for any reconstruction needed.
‘For a lot of people [their insurance claim] is the largest sum of money they will ever deal with in their lives,’ he said. ‘To jeopardise that by the chance they might get short-changed is a silly situation to put themselves in.’
The normal fee for these insurance claim services by DDL is 10 per cent of the claim settlement, but Mr. Eccles thinks most property owners find it worth it.
‘From our experience post-Ivan, what we know is through our representation, the claimant received a much more accurate and more significant settlement,’ he said.
In addition, Mr. Eccles said hiring the services of a QS could also take the ‘fear factor’ out of the settlement process.
‘At the end of the day, whatever cheque the homeowner receives, they can be assured it was the highest settlement they could have received and they don’t have to second-guess the settlement.’
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