Insurers to link property cover rates to past claims
Mumbai, Mar 20, 2023
Property insurance is likely to cost more for large risks with insurance companies anticipating a hardening of rates in the reinsurance markets. Most large insurance covers are renewed in alignment with the financial year, with policies starting from April 1.
For the first time, many non-life insurance companies have decided to link the pricing of fire insurance policies to individual claims experience. According to industry sources, the revision follows the regulator’s directive that rates published by the insurance information bureau need not be treated as a minimum rate.
Linking insurance rates to the track record of a policyholder enables companies to give discounts to a maximum number of customers as claims in property insurance have a low frequency as against motor or health insurance. However, claim experience-based pricing is bad news for anyone who has had a large claim in the last three years. Insurers are doubling rates for those who have reported claims that are more than three times the premium paid.
“Pricing should not be linked to claims as, in fire insurance, any policyholder who has not made any claims for the last 30 years and had a claim last year will see their premium go up,” said a businessman whose industrial policy has come up for renewal. According to the businessman, the insurance companies are acting in concert.
A spokesperson for the General Insurance Council — an association of non-life companies — vehemently denied any direction on pricing by the body.
An industry official said the decision to link pricing to claims experience was positive as premium rates will go down for good risks. “Earlier, all good and poor risks were paying the same premium,” he said.
Fire insurance has seen cut-throat competition among insurance companies since detariffing, which happened soon after liberalisation. The share of fire insurance has dropped from 25% to 10%.
[The Times of India]