The Insurance Association of Jamaica (IAJ) urges property owners to check whether their coverage reflects the true replacement value of their homes and businesses, as the average clause – a long-standing but little-understood insurance provision – continues to reduce Hurricane Melissa payouts for underinsured policyholders.

“The IAJ recognises that many policyholders do not fully appreciate the effect of underinsurance until they suffer a major loss,” the association said in a written response to the Financial Gleaner. “This is where the industry, brokers, valuers and policyholders all have lessons to learn.”

The clause reduces a payout in the same proportion that a property is underinsured. If a home is insured for 70 per cent of its true replacement value, the average clause can mean an insurer pays only 70 per cent of an otherwise valid claim – even on a partial loss – with any policy deductible still applied on top.