By Jenelyn Abinales
As the islands slowly ease from the grip of the more than two years of the COVID-19 pandemic, the insurance market has remained a steadfast constant for the islands, although a host of rollercoaster effects have beset them and their varied clients.
Guam Business Magazine reached out to insurance industry experts who do business in the region to discuss their thoughts in today’s climate of health and business.
Which islands, and countries, do you do business? Which market sectors or industries are the majority of your clients?
Brent Butler, general manager, Nanbo Insurance Underwriters Inc.: Nanbo conducts business in Guam. Nanbo offers property and casualty insurance and has clients in the hospitality, construction, retail and commercial leasing industries.
Frank J. Campillo, health plan administrator, Calvo’s SelectCare, Calvo’s Insurance Underwriters Inc.: Our business operates in Guam, the Northern Mariana Islands and Palau.
Jo Takagi, vice president and general manager/Pamela A. Cruz, executive vice president, Takagi & Associates Inc.: Takagi & Associates first opened its doors in Guam in 1990 and further expanded by opening a branch office in Saipan in 1994. Our Guam and NMI clients range across all business industries and personal sectors, big and small. To accommodate the needs of each of our customers, we provide a range of insurance products which include property and casualty insurance for personal lines such as automotive, homeowners and renters. For our business clients, we provide commercial lines of insurance which include property, general liability, workers compensation and errors and omissions. We also offer numerous insurance solutions specific to contractors, such as contractor’s all risk coverage, builder’s risk and treasury listed bonding. Additionally, we offer life, AFLAC, surety bonding and many other products for those looking for specialty products.
Annmarie T. Muna, president and general manager, AM Insurance: We transact business mainly in Guam and the NMI, along with the United Kingdom and the U.S. Our market sectors include government and non-government business, made up of hospitality, leisure, communications, construction, petroleum, retail, wholesale, aviation and personal, such as home and auto, among others.
Jerry Crisostomo, plan administrator and manager of health plans, Moylan’s NetCare, Moylan’s Insurance Underwriters Inc.: NetCare does business in Guam, the NMI, Palau, the Federated States of Micronesia and the Marshall Islands, with Guam being the largest market region. The major industries we cover include airlines, tourism, construction and retail.
Arvin C. Lojo, health plan administrator, TakeCare Insurance Co. Inc.: TakeCare operates in Guam, the CNMI, Palau, FSM, the Philippines and American Samoa. Our membership includes both public and private sector accounts primarily from both federal and local government entities, construction and hospitality industries.
After two years of COVID-19, how has this affected your clients? Have you seen market shrinkage and closures, or lack of business from your clients – or certain market sectors?
Butler: Many of our clients in the hospitality industry and other industries have been forced to reduce or suspend their operations due to the decrease in visitor arrivals. As a result, many have had to reduce the size of their workforce. Several clients in the car rental business have had to drastically reduce the size of their fleet.
Campillo: We have seen declines in the number of insured employees on a per employer group basis in our commercial segment, while the government segments, both federal and local governments, have been fairly steady in terms of insured employees.
Takagi: As we are all aware, Guam’s main source of revenue comes from tourism. This sector was hit the hardest once quarantine restrictions were in effect. Many of our local and NMI clients who had businesses tied to the tourism sector were forced to reduce hours of operations or shut down completely. This in turn caused wage reductions, expenditure cuts and employee layoffs for many. This dramatic market shrinkage ultimately impacted many of our clientele and businesses in all sectors.
We did continue to see a growth in the construction sector, especially from contractors that dealt with the military buildup or projects. We saw an influx of contractors asking for insurance products ranging from contractor’s all risk insurance, builder’s risk insurance, treasury-listed bonding, United States Longshore and Harbor insurance and Defense Base Act insurance.
Muna: A number of clients have been affected; mainly those that previously relied heavily on the tourism industry. Their overall revenue has declined and depending on their ability to innovate and adapt to this challenge dictates if they have been able to minimize their loss. We have lost some accounts due to business closures.
Crisostomo: The global pandemic has had a profound impact on most if not all client groups across all industries. The negative impact includes loss of business revenues, employee layoffs and business closures. NetCare lost 2% of our insured market due to business closures.
Lojo: TakeCare’s clients experienced closures primarily in tourism related business. We saw a steady increase in enrollment in recent months, because of the easing of restrictions and higher vaccination rates.
Has inflation and the rising costs of doing business (gasoline and utility increases) also affected clients?
Campillo: General inflation has affected and will continue affecting everyone in the general economy for the foreseeable future, and possibly more so in the healthcare sector.
Takagi: As with any business or consumer, you can expect to see cuts in expenditures with the rising cost of goods if income does not rise alongside it. In times of uncertainty like this, clients tend to seek only the minimum necessary coverages to reduce costs. During these trying times, we do our best to provide consultation and awareness. As is our standard practice, we work with our clients to find the best solutions to meet their needs while making sure they are still adequately insured.
Muna: It is yet another challenge in a very difficult two years of addressing the problem of lost revenue and on top of that rising expenses. But we have noted the resilience of our clients and their determination to press forward.
Crisostomo: Absolutely. Any increases to the cost of doing business ultimately has the unintended consequence of passing these increases directly to consumers.
Lojo: Yes, these factors always affect business, pre-pandemic and during the pandemic.
Are premiums a concern to clients? Which market sectors have suffered increases and why, and how are clients reacting?
Butler: Clients continue to look for ways to reduce costs. In some cases, clients have opted to self-insure some of their assets (provided there is no bank-mandated insurance requirement), increase their policy deductibles and reduce their coverage limits to help reduce their premiums.
Campillo: Premiums, especially during inflationary times, are a large concern to employers and employees, and our challenge is mitigating increases while providing valuable healthcare services to our islands populations.
Takagi: Premiums have always been a concern for clients even before the pandemic, and understandably so. What many may not realize, however, is that insurance premiums for the personal lines market such as automotive, homeowners, and renters insurance are controlled by tariff. Since tariff pricing has not changed recently, consumers really shouldn’t have seen any increases in these premiums. However, for commercial or specialty insurance coverages which may require us to access the excess and surplus lines markets and carriers off-island, we did see an increase. Unfortunately, this is due to the hardening of the global insurance markets; hardening occurs when restrictions grow in the marketplace, often due to financial losses sustained causing reduction in supply. Many insurers will increase premiums, further restrict coverages or leave the market entirely in response to this. The insurance industry was beginning to see a hardening of the markets in certain insurance sectors pre COVID-19, and COVID further exasperated it.
Muna: Unfortunately, often in difficult economic times you do see in some areas increases in the insurance market on certain lines and industries. In respect to the clients, they are always aware of their premiums and often it is a significant expense line on their balance sheet. Oftentimes, they have little choice but to accept the higher premiums.
Crisostomo: Premium rates are always a concern to all clients but despite the poor economic conditions coupled with the rise in the cost of living overall, NetCare has been able to hold down premium rates to its clients or, at best, impose a slight increase based on utilization factors for specific markets.
Lojo: Premiums are always a concern to clients. TakeCare keeps premiums affordable through collaborative partnerships to better manage employee’s health care costs.
Insurance companies have always been able to offer a variety of products to fit different needs and allocated income – does this still hold true, and are clients looking for ‘value’ offerings also?
Campillo: We try improving our healthcare benefits by offering a variety of services to employer groups that deliver value. For instance, the pandemic has caused increased behavioral challenges to our population and we are helping by promoting wellness with a focus on behavioral wellness programs and initiatives.
Takagi: At Takagi & Associates, we have always strived to help our customers attain the coverages that they require at the best value we can provide. If our customers need a certain coverage and we can’t offer the coverage through our insurance carrier, we will search other markets on or off island to try and acquire those coverages. We have access to brokers and large insurance companies all over the world and we strive to get those coverages necessary for our customers.
Muna: Innovation in marketing is always high on the agenda of the insurance industry as you would like to stay one step ahead of your competitors. You would pursue anything that would benefit the client in both coverage and price. Having said that, we are in the midst of a hard market situation, where capacity is shrinking and therefore, prices are going up and sometimes along with coverage reduction.
Crisostomo: One-size-fits-all is no longer the norm in health insurance markets. Insurance plans must adapt to the ever-changing environment if we are to stay in business. NetCare offers a variety of health products based on a client’s needs and affordability. Clients look for not only value but access to providers and cost is just as important.
Lojo: TakeCare continues to provide innovative and value-based health care solutions to fit the needs of our employer groups.
While Pandemic Employment Payments have ceased, there are still grant payments and tax refunds going into the market. Additionally, there are businesses opening or re-opening slowly, and a few companies new to the island. Does this translate into additional business in the island or islands for both commercial and individual clients?
Butler: Yes, as companies gradually re-open, their insurance needs increase as they acquire new assets and hire additional employees.
Campillo: There are sectors of our economy that continue to grow, such as construction and military-related business activities. However, we need our tourist market segment to reopen, as this is a critical component to get the rest of the islands’ economies to recover from the pandemic. Of course, we have a new challenge with the geopolitical effects of the ongoing Ukrainian-Russia conflict, which could delay the recovery further.
Takagi: It’s encouraging to see that businesses are re-opening and some new development brewing. We view this is a sign of the start to recovery, but we are still far from our pre-COVID days of economic stability and growth. The sooner we can get the island back to pre-COVID status the better. Tourism still has not recovered and it will probably be a while before that happens.
Muna: What it did do was enable business to survive and employees to receive a paycheck for them be able to look after their families. In relation to additional business to the island and/or existing companies, COVID delayed this from occurring. But, with light at the end of the tunnel we should see new businesses begin in the coming years.
Crisostomo: Yes, despite the economic downturn, we continue to see new business start-ups and more importantly the influx of businesses related to the military build-up at Camp Blaz.
Lojo: Any financial help and support ensures employers can continue to provide health care coverage to its employees and minimize reliance on public health services.
Is there good news from the insurance industry? We are talking to a group that are steady and consistent employers – and offer training and an upward path, so have you been able to maintain a labor force or are insurance companies dealing with the labor shortage like everybody else?
Butler: Fortunately, we have not been affected too much by a labor shortage as employee turnover at Nanbo is very low. Furthermore, we had taken steps to re-direct our customers to digital channels for information, service and inquiries, where possible, which allowed us to be more efficient. The use of touchless services such as online payments, payments over the phone and online quotes has increased substantially.
Campillo: We have maintained our labor pool very consistent throughout the years by providing value benefits but have seen minor effects from individuals relocating to the U.S. mainland.
Takagi: From a global perspective, despite lingering concerns about COVID-19 variants, many insurers expect 2022 to be a year of advancing recovery. Many industry experts believe the market hardening is slowing down and on the path to correction. We hope that prices will stabilize to reflect this.
Fortunately, Takagi & Associates was able to maintain its workforce without too much of an interruption. Being that we are an essential business, we prioritized our efforts to stay fully staffed for our community during this time of need. Regarding training and development of employees: the company has always been highly dedicated to this. We take professional development and growth of our staff very seriously and encourage our team to continue striving. We take pride in the fact that many of our team members have achieved and continue to pursue higher level insurance designations that support their line of business and their own personal success. We have two fully certified chartered property casualty underwriters in the office, which is the highest insurance designation that can be achieved globally. Our corporate philosophy is founded on the idea that we provide our clients and community the highest level of service and knowledge that an insurance company can provide. As for labor shortages currently, we do feel the impact of this with new hires we are seeking.
Muna: Our labor force has been consistent in numbers and I believe this would be the case across the industry as a whole, but we are always looking for individuals who look at insurance as a career opportunity.
Crisostomo: The good news for consumers is health insurance plans continue and will continue to provide the needed coverage for COVID treatments as with any other illness.
NetCare has seen a slight change in staff turnover due to employees relocating to the U.S. mainland over the last two years, but overall, we have been able to maintain a steady and consistent workforce.
Lojo: Yes. Due to the easing travel restrictions, health care and services can now be offered off-island for services and treatments not available in Guam and other islands. The higher vaccination rates contribute to less hospitalization, and will not, going forward, significantly impact the health care delivery system.
Specialized expertise has always been a challenge on Guam because of the lack labor resources to be able to meet skills demands. This remains true for insurance companies and/or provider practices.
What do you hear from the underwriters, who operate in more than one geographical area?
Butler: The reinsurance market continues to harden. As a result, the premiums for property insurance with coverage for natural catastrophe risks such as typhoon and earthquakes will likely continue to increase.
Campillo: Pandemic challenges seem to affect underwriters differently depending on geographical areas. Specific country closures and government subsidies varied across countries.
Takagi: When corresponding with underwriters and other industry professionals in other areas, we discover that many are quite unaware of Guam’s unique insurance culture – which includes the regulatory nature, industry structure, standards and operating processes that are distinct to Guam. Those who are open to dialogue and willing to investigate further are often extremely surprised to discover how resilient our insured community is. On the other hand, we come across individuals who have never been exposed to different cultural insurance standards. This disconnect oftentimes make it challenging for them to understand our unique needs.
Muna: We understand underwriters and brokers elsewhere are going through the same difficult last two years as we have here in Guam. With enforced shutdowns and employees suffering COVID, they are not able to work, or are alternatively working remotely. This has caused disruptions to the industry and the ability to get things done without some difficulties.
Crisostomo: Obviously, the pandemic and specifically COVID related treatments have had and continue to have negative cost impact on utilization experience compounded with long term medical conditions.
Lojo: TakeCare sees comprehensive clinical evidence and data to be able to provide a better forecast on the costs of services related to COVID, including vaccines and treatment medication.
Are patients willing to go to hospitals and/or off-island for medical care, to include the Philippines now that is possible?
Campillo: The access to off-island care was altered by the pandemic due to the closure of Asian countries such as the Philippines and individuals are seeking care in Hawaii and the mainland U.S. We foresee medical care returning to the Philippines with the recent re-opening announcement and the reduction on quarantine restrictions.
Muna: Given the unavailability of specialty medical care, patients still continue to seek medical care elsewhere. Although due to COVID, it is harder to get medical attention due to the restrictions and limited travel options and availability of appointments. People are still scared of the high risk of exposure on planes and in other places.
Crisostomo: At the onset of the pandemic, off-island medical referrals drastically dropped as members chose not to travel off-island for care. However, in 2021 and year to date 2022, we continue to see a dramatic increase in off-island medical referrals, in particular to the U.S. mainland. Philippine referrals have been nominal due to the travel restrictions imposed by the Philippine government.
Lojo: TakeCare started experiencing an increase in off-island travel for medical care, especially to the Philippines resulting from the easing of travel restrictions and higher vaccination rates.
Has the deluge of COVID testing at clinics affected those appointment systems also?
Campillo: The requirement for travel testing and frequency was a deterrent, but restrictions are being lifted, which improves the appointment process and time for members that are trying to access care in the Philippines.
Muna: From my experience, the clinics are doing their best to set up processes to handle COVID testing and vaccinations separately to maintain their regular scheduled appointments for their patients.
Crisostomo: I’m sure the high request for COVID testing at private clinics has impacted the appointment and scheduling of medical visits.
Lojo: We have seen COVID testing influx at provider clinics and offices’ impacting appointment schedule for these clinics.
Is the supply of COVID test kits regularizing?
Campillo: Covid-19 tests supplies became constrain in January and early February, but that is subsiding and the supply should be normalized by now.
Crisostomo: We anticipate that the request and supply of COVID testing kits at this point have been regularized.
Lojo: TakeCare’s provider partners continues to experience COVID testing kits supply chain issues.
Is the Biden effort to get test kits to every household useful?
Campillo: Anything that helps individuals get access to tests is helpful, especially if they become convenient for consumers.
Muna: Yes, this will help individuals save time and provide the ability to get quicker results.
Crisostomo: I believe so. Consumers will be more empowered and proactive in using these test kits as their initial testing before seeking a confirmed testing result at medical clinics or at government operated testing centers.
Lojo: Yes, however, supply chain issues need to be addressed and the effectiveness the effectiveness of home test kits especially, to achieve a higher level of test result accuracy.
Have supply chain issues affected medication?
Campillo: Yes; medications have not been immune to the supply chain challenges around the world. This has translated into shortages of some medications and cost increases for many others.
Crisostomo: Receiving medications through the mail order program, as well as medications dispensed at retail pharmacies have been impacted by the delays in shipping and supply chain issues.
Lojo: The supply chain continues to impact medication sources, and especially did so during the height of the pandemic restrictions and lockdowns.
Are clients more engaged with wellness offerings and focusing on self-care since COVID?
Campillo: Individuals are re-engaging with the wellness initiatives that we offer, but the engagement is still limited by some of the recent spikes experienced with Omicron.
Crisostomo: Absolutely. We are seeing an increase in members enrolling in the various wellness programs, including disease management programs.
Lojo: TakeCare prides itself on its wellness, disease management and fitness programs. We intensified our efforts during the pandemic to ensure our members strive to live a balanced lifestyle to include being active, relaxing and unwinding, eating right, and being socially connected.