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Insurance premiums could rise next year as the industry tries to make up for claims, mostly from corporates, exceeding Rs 6,000 crore this year.
The large claims following the floods in Jammu and Kashmir, Hudhud cyclone that hit coastal Andhra Pradesh and Odisha, as well as fires, have pulled up the claim ratio. As a result, there could be a hardening in premium in the next financial year.
State-owned insurance companies said for large covers of Rs 4,000 crore and above, the premiums could go up by almost 10-15 per cent. On an average, large policies that cover business disruptions apart from fire and damages from natural disasters could go up to Rs 45 crore to Rs 60 crore, based on the size of the cover.
“The large risks are backed by a big reinsurance cover, which is received both from Indian and international reinsurers. Since there have been major losses, the premiums would not only be dependent on the claims, but the capacity of the international reinsurers to cover these risks as well,” said a senior public sector insurance officer.
In the past few months, general insurance companies, both private and public, have taken a hit on their books due to large claims from companies. For the first quarter (April-June) of this financial year, New India Assurance’s combined ratio stood at 115 per cent compared to 110 per cent in the same quarter last year due to a large claim received in the property segment.
Due to this their underwriting losses for that period went up to about Rs 500 crore compared to about Rs 350 crore in the last financial year. In recent periods, large contracts that have been renewed have seen some revisions in premiums. For instance, in the case of a large public sector enterprise in the oil and gas sector, there was a marginal increase while there was a large hike in premium for a private oil company due to a large claim.
However, for firms like NTPC where the large-risk contract was renewed with public general insurance firms, there was no hike in premium.
Similarly, the infrastructure sector — that has seen renewals — has also seen some hike in premiums owing to some losses due to fire and other causes. Some such claims are still under dispute.
While contracts come for renewals at different periods, a major portion of the reinsurance contracts would be renewed after two months. This would be the final decision maker for the revision in rates, either upwards or downwards. Industry experts said based on the claims, the premiums are usually revised upwards or let remain static. If there is a large change in the size of the asset, the premiums are automatically revised.
