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19/10/2022

POSITIVE CHANGES:
at large system of government

Over the past weeks there have been a flurry of commentary in the press concerning possible elections in early 2023.

There were a number of interesting areas mentioned, from lack of confidence for party leaders to the thought provoking topic of removing the at large system all together from the election process.

The at large system is interesting in that it has shaped our political landscape over the past years. It was first introduced by the UK to affect the then Lavity Stoutt VIP administration. Although it took a while to be used effectively in counteracting the in district aspect of elections, it also took a dark turn and was utilized by future administrations to use popular vote as the basis for winning an election. One thing that has been obvious is that neither systems have been effective enough to satisfy the needs of the populace and more so the needs of local indigenous British Virgin Islanders.

The greatest downfall of the at large system in its current application is that it only adds numbers to assist in getting the right amount of candidates to win election but it doesn’t ensure synergy between the candidates and the portfolios that are filled after election therefore making the probability for an effective government to diminish.

After reviewing the information in the blogs over the past few weeks addressing the state of BVI politics, here is my suggestion for a more effective system. Feel free at the end to criticize dismiss or give suggestions which you feel are more fitting.

First of all the BVI is a very tiny territory. It is not a country but a colony of England. Despite that, the BVI does enjoy a certain level of autonomy over the past years and acts in a similar manner as an independent country. I firmly believe that the at large system is not working but it can be structured in a way that can make it a feasible mechanism for change in a positive way. As part of our constitutional review I would like to see us consider the following. We should keep the 9 seats in district but add another 2 seats for Anegada and Jost Van D**e respectively. Additionally Virgin Gorda has grown in development and population to the point where it can now have 2 seats in government. So another seat would have to be created which would bring the total in district seats to 12. I also suggest that we raise the amount of at large seats from 4 to the following 7:

Premier / Minister of Finance
Minister of Tourism and Culture
Minister of Education
Minister of Communications and works
Minister of Health
Minister of Natural Resources and Labor
Speaker of the House

What I am suggesting is that the premier does not represent a district instead he or she represents the country and the same argument holds for the Labour minister or any of the other ministers who represents the entire population, not a district, class or creed of people in the British Virgin Islands.

What a system such as the one described above would do, is it adds relevance to at large candidates and would force political parties to choose candidates wisely not only by popularity but also the skill set that they have as it relates to the portfolio for which each candidate is vying. In essence if put in place the voting public should be able to look at the candidates to see if each candidate in their mind is (a) qualified to hold the post which he or she is vying for or (b) have the maturity or demeanor in carrying out the position.

I am a firm believer that 5 ministries are not enough and as a tourist destination, Tourism should have its own ministry and should be peered with culture. Although Tourism doesn’t generate the revenue of the financial services sector I still believe it is the most important pillar of our economy and has been neglected for far too long.

Notice that I also believe the speaker of the house should be voted at large.

Also the public should have the right to call for a no confidence vote on any elected member if he or she fails to perform their duties or abuse their power in office. In the words of or great former leader Lavity Stoutt “he who appoints can also disappoint.”

I will not speak on who should make up the opposition because I think that if a system as described above were to be considered it would make it easier to devise a system for an opposition.

One of the arguments you would hear from elected officials is that the premier has never been voted at large before and each winning party should reserve the right to choose their premier. My answer to this is that the president of the United States is voted by all the states and the same system occurs all over the world and if it is our aspirations to be like leading countries around the world shouldn’t we follow suit?

Another argument would be that by implementing such a system you can end up with a composition of multiple parties forming the government and they may not be willing or able to work together as each party have different goals. My answer to this is BVI is a very small county of which indigenous BV Islanders are already in the minority and that number keeps shrinking day by day as we attend funerals every week as our people continue to die and get phased out of a country that our forefathers built that we have allowed to slip through our hands by keeping each other down. The BVI is too small for individuals elected by the public not to work together for the greater good of the country. Don’t you want to see a society where everyone is given an opportunity to work, have improved infrastructure such as schools, hospitals, roads, access to safe and clean drinking water, world class telecommunications, reasonable power supply with use of fossil fuel and alternative energy sources, sporting facilities, year round tourism, embracing foreign investment, dialogue with USVI to support the BVI economy the way we support their economy which would give significant meaning to friendship day. These should be the type of goals an elected official elected by the public at large should be striving towards for the benefit of the country.

In closing, for far too long politicians have been using the votes of naive poor people to enriching themselves.
We the public need to say enough is enough. We need to be a part of the decision making process that determines who our representatives will be and to hold them accountable as we cannot continue to suffer as we flip flop parties in and out that do nothing in the interest of the public. Take a drive from East End to West End and look at the infrastructure in the territory and ask yourself has there been any true development in the BVI in the past 20 years.

10/10/2019

Why have insurance Premiums tripled upon renewal



Ask someone their thought about insurance companies in this territory and the words used to describe them may not be repeatable in the public. Honestly, not all the negative comments on insurance companies are warranted and in several instances the confusion comes because of the lack of knowledge of the buying public. I would like to take this time to show you how insurance works and why things impact policyholders negatively in terms of rate hikes after a catastrophic event like Hurricane Irma.

I know the buying public would often say I pay for insurance every year, nothing happens, and I don’t get anything back. That is the point, Insurance is a contract which promises to pay after an unforeseeable loss event. So, if nothing happens you don’t get anything back. It is not an investment product as it does not allow you to gain from a loss event. Instead an insurance policy is intended to “indemnify” which means to restore you to your pre-loss position. Now image life if you had become complacent and not continue to buy insurance coverage for your home since we haven’t had a major storm since Hurricane Marilyn back in the 90’s.

Did You ever wonder when you spend fewer than $10,000 in one year for a $800,000 home, how will the insurance company make enough money to pay for your claim when it arises. Obviously, there will be some level of investment for future losses involved but there is much more to it than that.

In the British Virgin Islands, we operate an agency system where insurance agents such as Caribbean insurers, Century Insurance agency, Creque’s Insurance agency and others act in a fiduciary capacity for insurance companies emanating outside of the territory. The insurance companies they represent include Lloyds of London, Gulf Insurance Limited, Colonial, NAGICO etc. Fiduciary in this instance means that they are there to represent the interest of the insurance company and not the interest of the policyholder directly. In other societies the interest of the insured is satisfied by insurance brokers. There aren’t many brokers in the insurance industry locally, however insurance agents try their best to explain the product to the customers seeking insurance.



These insurance companies write business Caribbean wide, so your risk is shared with the rest of the Caribbean. Also, for additional capacity and protection these companies buy reinsurance coverage. Remember reinsurance is one insurance company buying insurance from another insurance company. Catastrophic losses are shared via reinsurance treaties worldwide. As a result, when a loss occurs, we indirectly share in that risk and when Irma occurred, the rest of the world share in that risk via reinsurance. No matter the policy, when you suffer a loss, it is expected that the cost of insurance upon renewal will go up. The same also holds true for catastrophic losses as rates in the USVI went up 250% after hurricane Hugo. As far as investment are concerned, both insurance companies and reinsurers are required to have their investments in what we call liquid assets which are assets that can be quickly converted into cash when needed. Reinsurance company use sophisticated models which utilize information gathered from weather experts to help them predict the severity of storms and hurricanes and book reserves well ahead of each hurricane season.

Note that as the Caribbean is a small community the bulk of our capacity is funded via reinsurance therefore the insurance agents and insurance companies do not influence these rates as they are set by the reinsurers every year. So, it should not come as a surprise that after such a devastating event like Irma to see the rates go up and, in some cases, has tripled. Also be aware that deductible would also go from 2% to 3%.

I will stop here for now but in my next blog I will talk about why some homeowners have been losing their homes post Hurricane Irma.

28/09/2019

Why You Need Content or Renters Insurance

Most of you have seen first-hand the devastating impact of a hurricane. Some of us have lost everything during Hurricane Irma or Maria. Those who had content insurance were able to file a claim to recover their loss of possessions while those without cover had to swallow the bitter pill of losing your valuable items forever.

What is content insurance

Content insurance is insurance that pays for damage to or loss of personal property in your home. It may also cover items taken from your home such as a camera or Jewelry while on vacation. Content insurance relate primarily to movable property that is not affixed to your home or rented property. Content insurance is usually sold in conjunction with your homeowners’ policy. When you do not own a home, you can buy a stand-alone policy to cover all your possessions while renting a house or an apartment. This stand-alone policy is called tenant homeowners policy or renters insurance.
What does content insurance cover?

Content insurance covers your personal and home possession from loss or damage by fire flood, storm or theft. It covers your possessions and the possessions of those living with you. Also, in some policy possessions of temporary dwellers are excluded.

Why buy content insurance?

You don't have to take out home contents insurance or renters insurance. However, it's a good idea to do so because if any of your contents are lost, stolen or damaged you will have to pay to replace them. The reality in the BVI is that more than half the population rent apartment and houses. While you may have limited or no control over the actual building and other structures, at least you can still cover your personal belongings. In the event of a hurricane the property may become uninhabitable but at least you will receive some compensation which can help you relocate or take up temporary accommodation until the property is restored.

Be sure to read your policy as some items may not be covered and high value items may require an additional charge.

Another thing to bear in mind content insurance for your own dwelling may also be subjected to underinsurance. Ask questions of your insurance company and make them highlight items that you want to make sure are covered prior to the occurrence of a loss event.

24/09/2019

UNDERINSURANCE

As we are now in the peak of hurricane season, I will touch on a couple of issues that ae appropriate at this time. We should be thankful at this point that god has been good to us and we have not seen another Hurricane like Irma, Maria and Dorian thus far. I empathise with the Bahamas and ask that we keep them in our prayers. Luckily their main industries have not been severely impacted. We know that in that time of need not all the relief effort always get to those who need it most as we too have experienced that during Irma. It is hard to believe although not unexpected that we are still in recovery mode. Rebuilding takes time but it should be a well-coordinated effort. I will address the shortcoming and our lack of preparedness in another paper, but I want to highlight some of the issues that affect us and will continue to have a great impact on our lives going forward.

As you can see hurricanes are becoming more and more violent which suggest that buildings must be maintained frequently and built or repaired to higher building code standards. We also need to take into consideration that yesterdays building cost is pale in comparison to what we have today. Material and labour cost have gone unchecked in this territory and will impact the valuation of your house. We as homeowner need to pay close attention to the valuation of our property. I am sure most of you have heard of the dreaded term underinsurance.

What is underinsurance you might ask? Underinsurance is the term designated to describe a situation where the amount insured for your home or contents is less than the cost to rebuild the structure or replace your insured possessions.
What causes this to happen. Either, you failed to get frequent appraisals on the value of your house, you insure to the value of your loan rather than the rebuild cost or your renovations or added features to your house raised the value and you did not adjust the valuation for this value increase.

There are two factors that can be used to mitigate against underinsurance.

Insurance companies write homeowners policies where they insure to the value of your property or they apply what they call a coinsurance variance. Companies apply 80% or 90% Coinsurance variances in some of their policies. Essentially what this clause does is that if you insure your home to 80% or 90% of the value of your property you will not be penalize for being underinsured. The reason for this is that it is not practical or expected for you to have an appraisal done annually so being slightly off should not result in a penalty.

I know after Irma there has been concern about how to determine the true value of your home. We have a number of appraisers and real-estate companies and there is no standard to evaluations. There is no price control mechanism and no semblance of standard cost of like materials. Labour cost also has no standard.This makes appraisals and rebuild estimates to be inconsistent so when the claims process arises there are usually disputes in the true value of the house and what is needed to repair it. I was a part of the claims review process after Irma as a Public adjuster and what I have noticed is upon renewal companies were assisting insureds in evaluating what the sum insured for the house would be.
What I would suggest going forward is that the insurance company and insured agree on an evaluation by a specific appraiser and once that appraiser determines the value the onus is on the insured to determine whether they want to insure at that rate or whether to be underinsured by buying less coverage.

I will stop here for now. In our next segment we will continue the topics I promised below.

What could have been done differently post Irma

Why you need content or renter’s insurance

Why has insurance premiums have tripled upon renewal

why persons are losing their houses since Irma, etc.

Everyone please be safe as Tropic Storm Maria passes the Territory.

16/09/2019

SOLUTIONS TO NHI

Before I begin, I would like to thank all of you for reading my first blog on NHI and for the enlightened comments. Many of you have asked me what can be done to fix NHI so I have installed this final segment.

In order to answer that question, we have to look at a number of factors. What has transpired since NHI was implemented. We know that there are not enough persons in the program to sustain it. Another issue of contention is the escalating healthcare provider fees. When the program was first introduced the provider fees started to rise and have tripled in some instances. The program has also elected to stop providing services for those who have not been making contributions whether the fault lie with the employer or the policyholder in question. Because of escalating costs, children and the elderly were relegated to getting care at the clinics and the hospital thus limited the scope of coverage. Now the recent issue of 3 doctor visits per month has been a hot topic on the blogs.

Honestly, we don’t know if this covers all the issues. What we do know however is that if we continue the status quo, funding will eventually run out. I also recall talks during the election campaigns about possibly addressing the high costs by the providers. This seem to be more of a consumer protection issue and from what I have seen in the draft consumer bill, price control will not be addressed so this will not be able to deal with this issue. Even under an insurance policy as with NHI, both programs will only pay the UCR or usual and customary rate for any procedure and the balance will be the responsibility of the insured / patient. In my years as an insurance professional I have never heard of any instance where government regulated rates charged by providers. This is probably driven by competition. In our perfect world called BVI even if the government could decree that all rates be reduced does this solve the issues of NHI? What about the ability to have access to a wider range of services locally and abroad? As I indicated before not all member of NHI have access to coverage locally.

Also, we understand that the program is losing money more than it takes in, so now the issue of sustainability comes into question. Is it the intent of the government to tax the population to raise more funds for NHI? Will persons be able to afford the new tax hikes and when will the tax hikes end. Will there be more in the not to distant future if NHI continues to lose money. Continued tax hikes may cause more persons to drop out of the program. Can we afford to go back to a program where we buy private insurance? Probably not, for the implementation of NHI has also impacted the cost of private insurance. So, what is left, for the government, to provide a larger subsidy to NHI which will be indirectly funded by your tax dollars.

As I indicated in an earlier blog, wanting to provide coverage to everyone under NHI is admirable. It is less admirable however for the government to roll out a program in direct competition with insurance companies. It also doesn’t help the situation by forcing the companies to provide coverage so that NHI can be accommodated. In Economics 101 it teaches you that if you want to grow your economy you have to protect your private sector. Government’s objective should have been to regulate the insurance companies in a way that they can strike a balance between offering affordable while providing excellent and timely service but allowing for the companies to achieve their prime objective of making a profit. This fits within my option #2 for NHI in the previous blog.

The question now is do we tax the system until it becomes stable or completely collapse; or do we try a public / private partnership with the insurance companies. These are the difficult questions for the Government to answer. Of course, a feasibility study would have to be done. Someone needs to go into NHI, identify what is the current state of affairs, and make recommendations for improvement.

Thank you for reading my blogs. I am Elton Lettsome, CPCU. This concludes my conversation on NHI and anyone is welcomed to ask me questions at any time. Since we are in the peak of hurricane season my next blog on Wednesday will focus on this topic. Specifically we will explore: “What could have been done differently post Irma,””What is under insurance”, “Why you need content and renters insurance,” “Why has insurance premiums tripled upon renewal,” and “why persons are losing their houses since Irma, etc.”

12/09/2019

Alternative #2 to NHI

NHI via Government & Private Insurance Company partnership

What I am about to talk about to me is the most comprehensive and most innovative way of implementing NHI. Bear in mind that we are talking about designing NHI from its inception and not fixing what we have today. As a caveat I would like to let the readers know that I am trying my best to write this blog in a way so that everyone can understand the message I am trying to convey. I hope I do not offend certain persons who may find some of the language simplistic.

Components of a healthcare program

There are certain elements that need to be present in order to have a successful health care program. There must be capacity by a large population within the pool to make it sustainable. Alternatively, if you are buying insurance it must be from a sizeable market such as the Caribbean, USA, Canada or Europe with quality insurance companies. The program cannot be complete without using quality reinsurance and strong provider networks.

Remember in the previous blog we said that insurance is all about the law of large numbers and in order for NHI to work the pool had to be of a certain size. The bigger the pool the larger the capacity to provide coverage. When I was at FSC there were fewer than 10 companies writing health insurance in the BVI. Companies such as Lloyds, BUPA, Atlantic Southern, and Colonial Insurance BVI Limited have operations around the Caribbean and all over the world. When you buy a policy from an insurance company you are buying into a larger network. The current capacity in NHI is limited and restricted to contributions from the 15,000 or less in the working class and the $35 Million subsidy by the Government. Even if the contributions and subsidy was enough, there would be a concentration risk regarding the funding of the pool. For example, if something was to happen to the government and they could not provide the current subsidy then survival of the program would come into question.

Because of the lack of funding available it is best to let the insurance companies provide the coverage not individually but as a group. By doing so the BVI insurance risk for the healthcare program would be shared with the insurance companies collectively, and with their operations elsewhere in the Caribbean, United Kingdom and the USA wherever similar risk is placed. Reinsurance purchased will also provide additional capacity as well.

How the partnership would work in theory

It would have to be a bold initiative which I perceive that only a Government entity can undertake. A public / private partnership to implement NHI. In this case we are seeking the government to join with the less than 10 insurance companies at that time that wrote medical insurance. The insurance companies as a group would enter into an agreement which in insurance terms is called a coinsurance policy which means that each company will share in the healthcare risk of the group. There would be standard clauses in that agreement for all the companies instead of each company setting its own policy. By doing so there would be no issue as to what the policy contains. Each company would participate based on the current market share they had in the local insurance industry prior to the inception of NHI. For example, if I owned 20% of the market prior to the implementation of NHI then I would end up with a 20% stake in NHI. The reason for this is for consistent application so that no one insurance carrier gets an unfair advantage over the other as you will be insuring a much larger group of policyholders since NHI would be mandatory and everyone in the British Virgin Islands will have to participate. From this point on I will address this partnership as the “NHI Group”.

After signing the coinsurance agreement everyone in the program will also have access to all the participating networks for each company in the NHI Group. Essentially the benefit of this is you should be able to go virtually anywhere in the world where these network providers operate and get treatment.
No insurance undertaking of this magnitude would be complete without reinsurance. For those of you who are not insurance savvy, reinsurance is one insurance company buying insurance from another insurance company. In this case the NHI Group would buy reinsurance from elite companies such as Swiss Re, Gen Re or Munich Re. ( I know my detractors will want to say that the current NHI program is reinsured by Munich Re which is the largest reinsurance company in the world. If this is raised in the blogs I will explain why this application is different from the current arrangement.)


As a customer / insured, buying insurance from the NHI group would cause the cost of insurance to go down because you are sharing the risk with the rest of the Caribbean, some persons in the USA and the UK. With the NHI Group purchasing reinsurance as a group would further slash the rates of insurance. Now you are entering the realm of a truly international program.
To further reduce the cost to the buying public a large deductible plan would need to be implement. The government would be responsible for this layer of coverage. This in theory would be the equivalent of the government subsidy under the current NHI program. The large deductible plan coupled with the implementation of a risk management program would further reduce the cost of coverage. Under the risk management program all insureds will be given coupons to buy health foods, they can get gym membership and other perks to live a healthier lifestyle. By doing so it will reduce the frequency of doctor visits.

Now that we have all the components, here is how everything would work in practice.

The government will pay the first $10 Million in claims. The next layer of coverage would be borne by the insurance companies in the NHI Group and the reinsurers would take the final layer.
Administratively, the staff which underwrote health insurance from all the insurance companies in the NHI Group would be transferred to NHI and build teams around them. The reason for this is continuity. They have been writing insurance for many years and they know what to do and they can train new staff members. Also, some members from Social Security would be retained to collect the moneys for the program while the insurance staff would be used to register insureds, buy reinsurance and settle claims.

The Board of Directors would comprise of a representative from each participating insurance company a member from Health Service Authority, Social Security Board, Financial Secretary, an independent businessman.

The benefits of this program is that because of the different layers of coverage it would make the program much more affordable, you only have to buy one insurance, you have access to multiple networks both in and outside of the territory as most of the companies are well known around the region and in the USA, Canada and Europe. So instead of buying a policy from Lloyds or Bupa or Colonial you will be buying an NHI policy of which Lloyds, colonial or Bupa are members. They make the coverage stronger as a group and chances of your service provider rejecting you NHI card is averted. The 1% subsidy by the working class can also apply if necessary, to help the elderly, children and unemployed get insurance since they would be exempt from paying for insurance. Also, because you are taking in the whole population the insurance companies cannot bring up the issue of preexisting conditions.
Government would have to spearhead a program like this. It’s like building a partnership with the regulator and the regulated. By doing so all the clauses necessary to protect the policyholder would be addressed while at the same time ensuring that good business practice prevails.

09/09/2019

Alternative #1 to NHI

Before I begin, I would like to thank all of you for reading my blogs. Remember the objective here is not to bash anyone or to whine about the shortcomings of NHI instead the intent is to educate persons on insurance and to show you how I would of done it differently and to urge our elected official to seek ways to have the problem corrected. After outlining the two alternatives to NHI I realize that the blog will be lengthy so I would like to make amendments. I will introduce the first alternative (NHI – Facultative Reinsurance Facility) in this blog and provide the other alternative (NHI via Government & Private Insurance Company partnership) on Wednesday or Friday.

In our previous blog I defined what NHI should be. I gave a brief history of its implementation while showing some significant difference between NHI and traditional private insurance. To reiterate, NHI is limited in its offering of coverage, limited in the ability to seek treatment abroad. The service providers rates have tripled since its inception and its implementation has made the purchase of supplemental or full traditional coverage cost prohibitive or expensive.
I was never directly involved in the implementation of NHI however while at the FSC I wrote a paper two months after it wss introduced on the consequences of NHI. I also provide comments for the then government of how it could have been implemented differently with better results. In that document produced, I spoke about two alternative that could have been taken which would ensure that everyone in the BVI would be covered and at the same time limiting the need for the government to have to provide funding for such a program. Remember the alternatives were designed to be implemented prior to the implementation of NHI not as a solution to NHI today.

NHI – Facultative Reinsurance Facility

I remember controversy concerning the percentage of persons in the territory who had health care coverage during the early debates of the need for NHI. There was the argument that there were more persons without insurance than those that had the coverage. Let’s explore this theory carefully. Government was the largest employer in the territory and at that time was insured by BUPA. All statutory bodies and their families had insurance, and most the Trust companies, hotels, supermarkets and their families had insurance. Based on this I would have been surprise if those without insurance exceeded 30%.

This is still a significant number of persons but only a guess. All the government of the day had to do was register everyone in the BVI who didn’t have insurance to get the true picture. After conducting this exercise and let’s say for argument sake this amount was 25% then the next step was to take this book of business to the London market and try to buy the coverage for those who did not have insurance. More than likely they should be able to get facultative reinsurance coverage which is designed to place hard to insure risks such as areas where there are a number of cases of preexisting conditions. I can almost certainly bet the farm that it would cost less than the $35 Million subsidy that government is pumping into NHI annually. Also, if uninsureds cannot afford to pay, government should register those that have private coverage and make them exempt from getting NHI providing the insurance they have offers coverage equal to or better than the minimum NHI requirement and they contribute 1% of their salary to help those that couldn’t afford this. By doing this those with insurance would be able to keep their coverage and those without would get NHI through the London market. This approach also removes the Government insurance subsidy from the equation and help to maintain the cost of private insurance which would not have escalated if the companies were not asked to provide supplemental coverage or if the health care providers have not raised their rates.

The program will be fully administered in the UK and there would be no need for staffing and chances are the healthcare provider costs would not have gone up because they will still adhere to the usual and customary rate (ucr) as is stated in every health care policies which states that the insurance company will only pay what is usual and customary when paying a claim therefore anything above that would become the responsibility of the insured.

Facultative reinsurance placement would of been the easiest way of introducing NHI for those without insurance while those with private insurance maintain their coverage by contributing to NHI. Under this scheme NHI registered persons would have access to the same excellent networks both inside and outside the territory as those with private insurance coverage.

I will stop here for now. As usual your questions and comments would be appreciated. In the next blog I will focus on the issue of “law of large numbers”, and “precertification”, which were raised in the comments of my previous blog.

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