CINICO receives $5.35 million for insurance product expansion

Parliament’s Finance Committee has approved an extra $5.35 million to fund CINICO’s expansion into property and casualty, motor and new health insurance products.

CINICO’s CEO Michael Gayle explained to the committee that the bulk of the funding will provide capital required for the insurer’s venture into property and casualty insurance to meet the Cayman Islands Monetary Authority’s solvency requirements and support a reinsurance programme.

CINICO must still submit a full business plan to be granted a licence from CIMA.

However, the regulator has indicated in discussions that $5 million would satisfy the solvency requirements, Gayle said.

The new offering is set to launch on 1 January, 2023.

CINICO will first start with a residential and homeowners’ insurance for civil servants.

Gayle said the plan is to “offer alternatives” through “slow and controlled growth” and not to undermine private sector offerings in that area.

New health insurance product

The supplementary appropriation will also finance the establishment of a local health services provider network. But CINICO’s chief executive said most of the expansion in the health sector will be covered by existing capital.

The expansion of CINICO’s health insurance coverage seeks to fill a gap in the available health products between more comprehensive products, which are quite costly, and the standard health insurance contract, which offers very few outpatient benefits.

“So, we are currently in discussion with our actuaries to try to identify a suitable balance between expanded cover in that range and affordability,” Gayle said.

This would enable the government insurer to provide a more affordable option for younger Caymanians and work permit holders, two groups that are typically healthier segments of society.

As part of CINICO’s transition into the open market, the insurer will establish a preferred provider network that will be available to those who purchase this new product.

The network can also be accessed by public servants covered by CINICO, who want to choose their health services providers. However, in this case the insured will have to pay a portion of the cost, typically 20%, whereas CINICO will cover 100% of the treatment by the Health Services Authority.

Potential to reduce premiums

Gayle believes that CINICO’s health insurance expansion and market position may, over time, lead to lower prices.

He noted that there was, rightly, concern about the high cost of health insurance premiums, which were a symptom of the high cost of healthcare.

“The cost of the premiums can’t be addressed without addressing the high cost of healthcare. Now through our provider network, we are going to be negotiating discounts. And the willingness to provide these discounts will be a condition precedent to participation in the network,” Gayle said.

“We currently cover somewhere in the region of 25% of the population between the direct clients and the indigents, and that number will grow as we go into open market. So, we will have the ability to influence prices to a very significant degree and it is our hope that our ability to do so will manifest itself in some amount of moderation of the costs of healthcare being rendered, even for those who are not in the network.”

Chris Saunders, as chairman of the committee, explained that CINICO is profitable in the business segments covering civil servants, statutory authorities and government companies, as well as civil service pensioners, whereas it incurs losses covering seafarers, veterans and the standard health insurance plan (SHIC).

Because most elderly people are insured by CINICO, the insurer has to take on all the high-risk components of the community and the risk is not spread, Saunders said. Civil and public servants were thus effectively subsidising the SHIC plan.

Expanding coverage to younger people and work permit holders would offset some of these losses, he added.