Motorists could soon be hit with higher insurance premiums by as much as a quarter, the insurance industry warned on Tuesday, saying the government’s new rental car levy will push up the costs of settling motor claims.
But while a consumer advocacy group is challenging the need for insurers to pass on the hike in costs to policyholders, some car rental companies are split on whether their customers should also face increased charges, Barbados TODAY can reveal.
The General Insurance Association of Barbados (GIAB) put motorists, vehicle repair professionals and hired car companies on notice that “motor insurance claims costs may increase in the not-too-distant future”.
“This levy will significantly impact the costs of settling motor claims, because it is expected to increase loss of use expenses by approximately 28 per cent, further adding to the financial strain already faced by insurers and policyholders alike,” said the GIAB President Andrea Walton.
Since learning of the levy, the association—which represents the industry—had reached out to the Ministry of Finance on multiple occasions seeking dialogue and clarification, but had not received a response to date, said Walton.
Insurers continue to face major challenges because of the limited availability of car parts, which often results in vehicles being written off or subject to lengthy repair delays lasting several months. In many cases, companies are forced to pay high freight charges to import parts urgently for individual repairs—a situation that is becoming increasingly untenable.
Walton reiterated that the industry remains committed to working with all stakeholders to find solutions that ensure fair treatment of policyholders while maintaining the stability and sustainability of the motor insurance sector.
Hired car firms mull charge
Andrew Harrison, who owns a hired car company, has already warned that he will be passing on any increase in insurance claims costs to his customers.
He told Barbados TODAY: “Whatever the government say we got to pay, hard or soft, we got to pay…which means it’s going to be an additional cost to the customers. So, rather than we paying, we will pass it on to the customers. . . .”
But the owner of Roett’s Car Rentals, Cliff Roett, is not anxious to pass on any rise in costs to his customers at this stage.
“We still have to stay within the market. We just can’t pass it onto the customers,” Roett told Barbados TODAY. “The market now is so saturated and competitive, that you just can’t pass on too many things to the customer, because they will just shop elsewhere.”
He complained that this situation puts hired car owners in a bind.
“So, it’s almost like we got our hands tied…our necks in a noose.”
Roett also argued that insurance costs are already too high: “Insurance costs are very high as they are, they don’t need to go up any more. I don’t know why Paul got to pay for Peter. You know that old saying. That should be at per rental company basis on how many claims they have.”
‘No to automatic rise’
The Barbados Consumer Empowerment Network (BCEN) said there should not be an automatic increase in insurance claims costs as a result of the levy.
“While BCEN acknowledges that the levy may increase the operating costs of hired car companies it should not automatically translate into higher insurance premiums for motorists. The connection between the levy and overall insurance costs has not been clearly established or publicly justified,” Executive Chair of BCEN, Maureen Holder, told Barbados TODAY.
Holder noted the GIAB’s contention that when a policyholder’s vehicle is damaged and undergoing repairs, insurers are responsible for covering the cost of a replacement hired car.
With the introduction of the new levy expected to raise daily rental rates, the insurance industry anticipates a corresponding increase—estimated at about 28 per cent—in its “loss of use” expenses. To offset these higher claim costs and maintain profitability and sustainability, the insurers say they may have no choice but to adjust motor insurance premiums upward.
Holder said:“BCEN believes that the insurance industry’s reasoning requires closer examination. BCEN notes that while insurers may face increased rental costs when providing temporary replacement vehicles, ‘loss-of-use’ expenses represent only a small portion of total claim costs. Therefore, a 28 per cent rise in that component does not equate to a 28 per cent increase in overall claim expenses. Loss-of-use costs represent only a small fraction of total claim expenses, and a 28 per cent increase in one component does not justify a corresponding rise in overall premiums.”
She argued that insurers benefit from negotiated fleet and rental agreements that can absorb some of the cost increases.
“Passing the entire impact to consumers would be unjustified, especially in a market already strained by high living costs and reduced affordability,” Holder added. “BCEN also finds the lack of consultation unacceptable, noting that neither the public nor consumer representatives were engaged in discussions on the levy or its potential implications for premiums. Policy measures that affect affordability must include consumer voices from the outset.”
Intervention call
Any impact should be quantified transparently before additional costs are passed on to consumers,” the BCEN leader said, calling on the Ministry of Finance and the Financial Services Commission to require full transparency and consumer input before any rate adjustments are approved.
“No increase should be passed onto consumers on mere speculation but must be based on evidence, not assumptions,” Holder said. “Transparency and regulatory oversight are essential to ease consumers right now in these difficult times. BCEN urges the authorities to require insurers to provide clear data to justify any proposed rate increases linked to the levy.”
She urged a stop to “opportunistic practices” where consumers are asked to bear automatic premium hikes from insurance companies without clear, data-based justification.
“Consumers deserve fairness, consultation, and accountability. Not ‘cost pass-throughs’ disguised as inevitabilities,” Holder declared. “A modest levy on hired cars should not automatically warrant higher motor insurance costs. The impact must first be measured, verified, and managed transparently. BCEN reiterates its commitment to advocating for transparency, accountability, and fairness in the financial services sector, and to ensuring that government fiscal measures do not erode consumer protection or affordability.”
emmanueljoseph@barbadostoday.bb
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