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Insurance Industry Sailed Through 2003 Without Major Problems
Competition, expansion outside of Puerto Rico, and Hipaa were uppermost in the minds of industry players
By LORRAINE BLASOR
December 25, 2003
The islands $5 billion-plus insurance industry had much to be thankful in 2003: The property & casualty insurance sector was spared from natural disasters; health insurance firms fared well amid heavy price competition; and life insurers reaped more business thanks to a tendency for people to seek protection when the economy is shaky.
"For the industry, the year has been excellent," said Luis Pimentel, president of Universal Insurance Co., part of property & casualty market leader the Universal Group. He said the industry benefited from the absence of hurricanes and other major catastrophes that can break insurers. The millions of dollars in property damage caused by the heavy rains in November will be taken care of by the federal governments flood insurance program, he said.
"It has been excellent, even though we arent seeing new jobs being generated," said Socorro Rivas, president of health insurer Triple-S, one of three companies holding multimillion-dollar contracts to provide medical coverage to 1.6 million people enrolled in the governments Health Reform program. She added that Triple-S expects to end 2003 with a higher volume of premiums.
Jesus Rafael Serrano, vice president of benefits at brokerage Aegis International Insurance Corp., said more clients sought life insurance this year, following the trend typically seen when the economy is unstable. "When economic factors are adverse, people tend to want to protect themselves more," he said. Serrano noted that life insurance is viewed as something solid to leave your family in the event of death. Aegis President Eduardo Chevres said the companys volume of commissions grew 15% this year.
Business was good in 2003, but price competition among players led some insurers to worry about its potential to unbalance the industry and lead to price hikes. "A price war is bad for the industry," warned Rivas. "We are vigilant not to get into such a war because it can unbalance the insurance industry."
Carlos Muñoz, president of MCS, which this year celebrated its 20th anniversary, said the price competition reflects the fact that the insurance industry has reached a plateau, and the only way for companies to grow is to take business away from competitors.
The limitations of the local market are pushing some insurance companies to seek opportunities beyond Puerto Rico. Carlos Benitez Jr., CEO of National Insurance Co., announced earlier this year that the company would invest $5 million to set up a property & casualty company in Florida, to be run by members of the third generation of the Benitez family. Cooperativa de Seguros Multiples announced it was investing in two South American insurance cooperatives (one in Ecuador and the other in Uruguay) and was looking at making similar investments in Brazil, Argentina, Guatemala, El Salvador, and Colombia.
Insurance Commissioner Fermin Contreras, who recently resigned, succeeded in securing legislation that adds muscle to the insurance industrys efforts to attack fraud. An estimated 10% of claims filed each year are said to be fraudulent. The legislation strengthens the Insurance Code, makes insurance fraud a felony, and empowers the Antifraud Special Investigations division within the Office of the Commissioner of Insurance to pursue criminal investigations instead of having to pass on these cases to the Police or Justice department.
The health insurance industry this year met its latest challenge under the federal Health Insurance Portability & Accountability Act: standardizing formats for online medical transactions. To ensure compliance with these new rules, which apply to all members of the healthcare industry, five insurance companies got together and set up a consortium known as the HealthCare E-Commerce Initiative. The consortium, in turn, hired Inmediata Corp. to serve as the insurers clearinghouse for all electronic dealings with healthcare providers.
This Caribbean Business article appears courtesy of Casiano Communications.