Insurance firms are likely to bump up property cover rates as extreme weather becomes more common in the country. This year, floods have caused widespread devastation in Karnataka, Kerala, Maharashtra, and Gujarat.
The severity of the disasters, which are taking place in shorter intervals, has prompted insurers to consider hiking rates in April 2020, when policies come up for renewal.
The companies’ hand is forced by the fact that they operate within a small customer base. Only a fraction of property owners across the country have signed up for policies. Ninety percent of the properties which were damaged in the 2005 Chennai deluge was not insured. It was the same case in Kerala last year when floods caused property damage of Rs 40,000 crore. Only 3.5% of the losses had insurance protection.
Around 2.5 lakh people have been displaced in the latest spate of rain-related disasters. “We are only in the first half of the year, and we have already seen a number of calamities — Assam, Bihar, Madhya Pradesh, Odisha and the current crisis in Karnataka. In the past five years, the severity of the events has increased; we are seeing once-in-a-century rain,” said Mohan CR, national head of property and risk management, Bajaj Allianz General Insurance Co. “In the first quarter of 2018, we saw a property loss of Rs 31 crore. That has more than doubled to Rs 72 crore in Q1 2019.”
Despite seeing premium growth in this category, insurers say frequent natural catastrophes have eaten into their profits. “Our premiums grew 55% year over year. But compared to an underwriting profit of Rs 43 crore in the property segment, today we are seeing an underwriting loss of Rs 32 crore. Our claims ratio has gone up from 41-83%,” Mohan said.
Most vehicle owners insure their rides as it is mandated by law. Even corporates take some form of accident cover, for instance, fire insurance. But homeowners remain reluctant to get insurance, say, industry experts. “After the heavy rains in Kerala and Kodagu district last year, we received several enquiries for home insurance. But very few of them translated into leads,” said a senior executive with New India Insurance.
Companies expect a sharp increase in the number of crop and vehicle insurance claims in Karnataka. Reinsurance firm Swiss Re, in its global report, pegged India at number two in the list of countries that are likely to witness worst catastrophes. China was the first.
News Source: Times Of India, Url: https://bit.ly/2N89IAF