By John I. Borja
With many obstacles and accidents that can happen in one’s lifetime, it’s important to have a safety net to ensure recovery in the face of disaster. Thus, insurance businesses are at the ready to help their clients overcome life’s challenges.
On Guam, our vulnerability to typhoons and earthquakes cause a unique situation where insurance companies not only have to insure their clients, but find reinsurance for their operations as well, as one unexpected natural disaster can immediately terminate what they’ve built over the years. This double outlook on assets requires local insurance companies to be more vigilant and proactive in the services they provide to keep Guam residents secured.
Overall, Guam insurance businesses agree that the market has relatively been flat for quite some time, primarily because the island has not experienced a major natural disaster in more than a decade. However, businesses have noted that the havoc wrought on by Super Typhoon Yutu to Saipan and Tinian in late October has served as a wake-up call to a sizeable amount of Guam consumers in terms of typhoon-related insurance.
Five companies offered their insights on what types of insurance products are offered, what the local industry looks like, what’s new and whether or not people are more conscious of natural disaster preparedness.
Alpha Insurers Inc.
Jeffrey Hsiao, CEO
Alpha Insurers has been servicing the people of Guam for 40 years and is a locally owned company. Alpha provides insurance for auto, home, commercial, bonding and marine cargo coverage. We have two offices — the main office in Hagåtña next to Bank of Hawaii and a Dededo branch currently at the A-One Store building next to American Grocery, but we will be moving to the Honukai Center next to American Medical Center in upper Tumon in January. We have a sister company, Beneficial Adjusting Co., which acts as Alpha’s claims department.
[In 2018,] the insurance industry was overall flat in terms of new policies written locally. A number of new auto policies and new home policies have not increased much compared to last year, and I think this is due to flat car sales because of rising car and gas prices. There were also fewer new home constructions compared to the previous because of the H-2B visa worker situation and labor cost issues. This affected the auto and home insurance premiums growth in 2018. Commercial insurance has seen a slight increase, but not much new growth. Once gas prices go down and H-2B workers are able to come back to work on private construction projects, new auto and home policies should start to pick up.
Due to the rising number of large auto accidents and stolen vehicles compared to the previous year, we are also more careful about accepting certain new customers for auto insurance.
We have just seen some tighter insurance regulations recently as well as what discounts we are able to offer, but overall not much else has changed locally.
We do not have an office outside of Guam nor are we writing any insurance outside of Guam, thus, Typhoon Yutu did not affect us directly. As for a rise in property claims or other related claims, no, we have not seen that either. However, there was an increase of interest in customers wanting to add typhoon insurance to their automobiles or homes after Yutu passed.
Calvo’s Insurance Underwriters Inc.
Paul M. Calvo, president
Calvo’s provides competitively priced consumer insurance such as personal auto, motorcycle, umbrella liability and homeowners’ insurance to the residents of Guam and Saipan with a variety of flexible payment options. We provide an extensive commercial insurance product line beyond the basic property and general liability and worker’s compensation coverage lines. We offer director’s and officer’s liability, errors and omissions liability, employment practice liability, pollution liability and cyber security coverage, among other specialty lines.
Our insurer, American International Group, has the financial capacity to also offer high-limit commercial umbrella liability coverage exceeding $20 million in policy limits and we can insure high-valued property risks such as hotels and shopping malls with values of several hundred millions.
Calvo’s Insurance launched SelectCare health insurance plans in 2000.
The property insurance industry is heavily dependent on reinsurance from both the United States and international sources to spread the risk for the Mariana Islands’ high catastrophe exposure to both typhoons and earthquakes. The financially smaller Guam domestic insurance companies need reinsurance to protect their long term sustainability as even one major typhoon could wipe them out if not for the hedge of reinsurance. Even the financially large insurance companies on Guam cede out portions of their high-valued risks to reinsurance groups to spread out the risk because of Guam’s history as being in the “typhoon alley” where storms always brew to our southeast and strengthen as they move toward our area of the northwestern Pacific. The less discussed but even more potentially devastating earthquake risk to Guam and the NMI makes property reinsurance a wise decision to Guam’s property insurance companies.
The issue of the rising catastrophe reinsurance cost to Guam insurers is always a concern if more and more devastating high claim losses accumulate over a short period of time. The worst case scenario arises should reinsurers elect to withdraw from providing reinsurance capacity to Guam and the Northern Mariana Islands and the smaller remaining reinsurance market requires higher premiums to accept the local risk. This situation could create the proverbial “tail wagging the dog” scenario.
The insurance industry is seeing new cyber insurance products developing to cover the risks of computer hacking, which is becoming much more frequent and expensive for companies. AIG and Calvo’s Insurance provides these new cyber policies now as well.
Beyond the new types of products, it is reassuring to see that some large clients are now questioning the financial capability of insurance bidders to actually cover a potential mega loss should they have one. Guam has had two major insurance company failures in the past which resulted in unpaid claims. In the absence of any government of Guam solvency fund to protect consumers from insurance company insolvency, it is imperative that consumers use due diligence to research if insurer A or B has the capability to perform as they promise. It’s especially so for very high values property structures or in health insurance where a very large pool of lives are insured.
Super Typhoon Yutu devastated both Saipan and Tinian and we are definitely insuring several of the large companies which suffered losses there. In comparison though to several other insurers which underwrote high valued risks in Saipan, our losses are small. When the total losses are all settled in Saipan, I am certain that the aggregate amount will be very significant. These types of large claim losses in a small community like Saipan or Guam for that matter will have an effect on the property insurers and their own reinsurers’ appetite to continue writing business at least at the same terms and pricing as in the past.
It appears that the period of “La Nina” which did not favor the development of storms in the historical area of formation has ended and the period of “El Nino” has arrived and with it the frequent threat of near misses or the direct hits every once in a while. Our 15-year period of a break from typhoons seems to be ended, unfortunately. I hope we’re wrong but everyone saw it for themselves in recent months.
Great National Insurers
Established: Sept. 20, 1973
Marilou Besagar, general manager
Great National Insurance offers a variety of personal and commercial insurance products, including life insurance. We also offer personalized services, such as inspections, review and recommendations to our clients’ policies. We have two locations — a main office in Chalan San Antonio, Tamuning and our branch office inside the Micronesia Mall in Dededo. We are also the only insurance agency that is open seven days a week and on holidays.
Locally, the insurance industry remains stagnant. The need to strengthen our economy is essential for us to see any significant growth in this industry.
The implementation of the continuing education requirements prior to a renewal of an insurance license.
We are fortunate that this typhoon did not cause damage here on Guam, hence our company was not impacted by this super typhoon. However, we do sympathize with our brothers and sisters in Saipan and the other islands that were affected.
Guåhan Insurance Services Inc.
Established: February 2013
Yuka Oguma, marketing manager
Guåhan Insurance Services Inc. specializes in home, auto and business insurance. GIS is the general agent for Sompo Japan Nipponkoa Insurance Inc., Japan’s largest property and casualty insurance company with an A+ (superior) rating from A.M. Best. We also offer in-house claims service by experienced adjustors.
Guam is currently experiencing a soft market due to no major typhoon or earthquake for the last 15 years.
Clients communicate online via texts or email rather than picking up the phone or visiting the office. GIS has adapted our ways to communicate with our clients by having online contact options and text messages for quote service.
We do have more customers who are calling for quotes, and the general public is more aware of these catastrophes happening. We recognized that people have a heightened sense of what damages they may suffer from by seeing our neighboring islands’ loss.
Since we do not write any risks in Saipan, we did not directly experience a rise in claims.
StayWell Guam Inc.
Chen Y. Mack, president and CEO
StayWell Insurance was founded in 1982 and primarily offered health insurance to the government of Guam. In the course of the years, StayWell expanded to offering health insurance to private businesses on Guam and the CNMI. After more than 30 years and 20,000 members strong, StayWell had established offering other lines of insurance to include auto insurance and home insurance. All policies are underwritten by Island Home Insurance Co. Inc. StayWell and Island Home Insurance Co. together provide protection, strength and stability. They are committed to serving the Guam community beyond expectations.
The whole Guam community, including the local health insurance industry is at the crossroads of healthcare delivery. These past three years, Guam witnessed a remarkable boost to healthcare services and access. This included the opening of a private hospital and a host of primary care and specialty care clinics. Certain life-saving procedures that were accessible only through an off-island medical referral are now available on island. On the other hand, employers and individuals who purchase health insurance experienced shock with the dramatic increase in healthcare costs and insurance premiums brought about by these new services. After all, improved access to healthcare delivery or new technology usually comes at a price.
The crossroads therefore represent the choices that the community has to make. Will an employer or patient choose to embrace all these new services and technology and shoulder the corresponding increase in cost? Is the Guam community ready for this price rebasing? Or will the patients revert to the off-island referral process that they are accustomed to and seek healthcare from the Philippines and other Asian providers?
Interacting with our clients, health professionals, partners and associates, I could sense in them mixed feelings about what is in store for all of us in 2019. All these uncertainties and questions cross our minds while we tread forward with hopeful ambivalence. For an industry player to thrive in this environment, it would have to be efficient and innovative in order to keep health insurance premiums affordable. We share our optimism as we welcome the new administration in Adelup.
Within our dynamic industry, we are seeing the following:
- intense use of healthcare data analytics to guide decision-making;
- more meticulous buyers that use all media and technology;
- drugs that could easily cost a patient more than $100,000 a year; and
• more acceptance of telemedicine technology on Guam. In the past, local practitioners perceived this as a threat to their practice even if it aimed to improve access to services that are not available on Guam. There were [Health Insurance Portability and Accountability Act of 1996] confidentiality concerns as well. Now, it seems that problematic issues have been addressed.