Puerto Rico enacts sweeping insurance reforms

Puerto Rico governor Ricardo Rosselló enacted six reforms to change the way insurers operate on the island, empowering the insured and opening the market to foreign surplus lines and microinsurance, among other measures.

Most of the reforms will only apply to new insurance transactions and not affect the 11,000 claims that are pending after the passage of the Hurricane Maria in September 2017. There were 287,000 claims from that natural disaster.

"When the hurricane came, a number of limitations were uncovered in the insurance industry for the insured. In my opinion, they were chronic problems that have been a burden for decades, but when the atmospheric event and the subsequent response occurred, there was a rather overwhelming dissatisfaction from the insured with the process of their insurers and insurance," said the governor, as cited by local daily El Vocero.

Of the laws signed, one could apply to the pending claims: the establishment of a specialized arbitration process for handling disputed claims.

The law establishes that in the lawsuits with insurers an arbitrator must mediate in the process of "appraisal" or evaluation. The arbitrators will not limit the option of the insured to go to a civil court.

Another of the laws will allow the territory's top insurance regulator to intervene so that insurers make partial payments to the insured. The law also stops the one-year clock insurers put on claims once they are filed by the insured.

Rossello said this change would prevent insurance clients from accepting agreements that are not beneficial to them.

The governor noted that events like natural disasters can generate extraordinary time disruptions. With the new rule, he said, "It is not a question of putting the insured in a vulnerable position so that, when there is a day left for the year, they have to accept an offer for fear that the term has passed."

One law clears the way for the introduction of parametric microinsurance that - in the event of a catastrophic event - would allow the insured to receive a predetermined compensation without having to go through the claims adjustment process.

"What these measures are about is giving our insured more options so that they can be insured at a lower cost and with rights that allow them to adequately make claims with their insurer," Rosselló said in a government statement.

One of the laws will also create a mechanism for the insured to file complaints against insurers that do not act in "good faith", while another law forces insurers to have an emergency response plan that must be updated every five years with the office of the island's insurance commissioner.

With the new laws, consumers can also buy insurance overseas if they have failed at three attempts to insure their properties in the local market.

Insurance commissioner Javier Rivera Ríos said consumers can buy insurance abroad, but from a list of authorized insurers that is reviewed every three months.

"It's a market that exists. Puerto Rico was the jurisdiction with the most restricted access to surplus lines. This gives the insured an opportunity to have more options to be able to insure with particular risks, just like the municipalities and the government," he said.