Insurance premiums have gone up 50% since the start of the year! And that’s just the start of what’s to come.

If you pay car insurance or homeowners’ insurance then your monthly payments are going up! If they haven’t already.

Last year, Managing Director of BCIC Insurance, Peter Levy, came on Taking Stock to warn us that insurance premiums could go up by 40% in 2023. Well, according to this article in the Jamaica Observer, some general insurance companies have already raised monthly payments by 50, even 60% since the start of the year!

General insurance typically refers to anything that is not life insurance. So your car insurance, homeowner’s insurance, accident insurance etc.

But why the increase? Well, there are a couple of factors at play. 

Levy explained that reinsurers were increasing their costs. A reinsurer is a larger institution that gives insurance to other insurance companies. 

Let me explain. Because Jamaica and other Caribbean countries’ economies are so small, AND we’re more likely to have catastrophic events like hurricanes, earthquakes, and volcanic eruptions, insurance companies can’t generate enough income from our premiums to cover all those potential losses. 

So they have to borrow from other larger countries or institutions. Most reinsurance companies that are able to take on the risk are in Europe and North America. 

But of course, with all the global uncertainties, reinsurers have been feeling the pinch themselves, and those risks now look a little riskier than they did before.

Plus there’s the gift that keeps on giving – interest rates. YUP! Higher interest rates mean higher cost of doing business for companies. It’s one of the reasons reinsurers raised their costs too. The cost of doing business went up for them, so they passed the cost to local insurance companies, and then those insurance companies passed the cost on to us. 

Locally, we know the Bank of Jamaica raised its policy rate to 7%. The policy interest rate is what the BOJ charges financial institutions that borrow from it. So this sets the pace for the loan rates that banks charge customers. 

So reinsurers increased their rates and the BOJ increased its rates and now the consumers- you and me – our purse strings are getting drawn tighter.

And it’s a double whammy because existing mortgage rates are going up at most if not all banks.

So not only will you have to pay the insurance company more for your home but you’ll have to pay the bank more too. It’s wild, right?