Unusually high claims have prompted insurers to be extremely selective in renewing contracts with jute mills. Baring a few, most jute mills are facing difficulties in getting insurance contracts renewed this year, even with higher premiums.
Frequent cases of fire in jute mills, owing to poor safety measures, have resulted in higher claims in the sector for long.
In 2007, a report by the Comptroller and Auditor General stated a leading public sector insurer had suffered a loss of Rs 7.22 crore, as it did not carry out proper due-diligence before giving insurance cover to jute mills. In 2005-06, the claim ratio at the insurance company for Hastings jute mills was 554 per cent, while for Wellington jute mill, it stood at 269 per cent. For jute mills of Champdani Industries in Rishra and Chowdwar, the ratio was as high as 12,122 per cent.
“Following the high claim ratios, we have become cautious in giving insurance cover to jute mills. The insurance cover is given only after proper risk inspection. In the case of jute mills, a single claim can result in a high claim ratio. Thus, based on the inspection results, we have also been loading the premium,” said N S R Chandraprasad, chairman and managing director, National Insurance Company.
“To get insurance cover for jute mills has become a big problem, as insurers are not ready to cover the risks,” said Sanjay Kajaria, former chairman of the Indian Jute Mill Association and owner, Hastings Jute Mill.
Most cases of fires in jute mills were reported in winter, between January-March, which incidentally coincides with the last quarter of a financial year, leading to high claim pay-outs in the last quarter. In January, fire broke out at Naihati Jute Mills in the northern fringes of the city, while in February a major fire broke out at Baranagar jute mill in north Kolkata.
“It is difficult to assess the reason behind fires in jute mills, as slight friction may lead to big fires,” said Chandraprasad.
