Insurance premiums, payouts rise in Kuujjuaq

KUUJJUAQ — In the aftermath of the Sept. 11 terrorist attacks in the United States, insurance premiums in Nunavik are rising to astronomical levels.

This means that anyone who wants to insure property or life can look forward to paying much more for less coverage.

Insurance companies that had to pay out billions of dollars after Sept. 11 have increased their prices and lowered their payouts.

“Insurance has become quite a problem all over the world, including in Nunavik,” insurance consultant René Laporte told Kativik Regional Government councillors last month in Kuujjuaq. “The forecast for the next 24 months is very sad.”

The KRG’s insurance premiums have risen 67 per cent over the past two years. At the same time, insurance hasn’t covered as much of the losses claimed by the municipalities, police force and airports under the regional government and it’s been harder to collect on claims.

In 2001, the limit for liability insurance at airports under the KRG umbrella had a limit of $100 million, including risk of war. In 2002, the limit dropped $25 million and the coverage no longer includes risk of war. At the same time, the premium has doubled from $50,123 to $96,045 in 2002.

Since 1996, the KRG has paid out a total of $2.6 million in premiums, but during this same period, the KRG claimed losses of $4.8 million, making the KRG a bad client for insurance companies that want to make money and not pay it out.

Insurance companies try to limit claims for losses to 65 per cent of a client’s premiums — but the KRG’s losses have been almost two times higher than the premium it paid.

In 2001-2 the KRG paid $709,014, but it claimed losses of $2,389,000.

The KRG’s annual losses have averaged $793,000 — but even based on this lower figure, it could face paying as much as $1.2 million next year for coverage.

Laporte suggested the KRG look at other ways to deal with its future losses, such funding a reserve for losses and creating, in effect, an internal insurance company that would pick up the tab for at least part of the losses.

The advantage, said Laporte, is that the KRG could have protection that’s not available on the market and make claims more easily.

But to make this kind of program work, Laporte said the KRG would also need a loss prevention program and the ability to fund its own reserve.

The KRG council decided to look at alternatives before its current insurance policy expires on Nov. 30.