The Hindu Business Line : General insurers slash fire cover premium rates

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Coimbatore Feb 21 The premium war among insurance players was not unexpected, but what has surprised industry insiders is the drastic cut in fire premium tariffs.

"The public sector companies operating in the general insurance space have cut fire premium rates by 30-40 per cent in the last one-and-a-half months.

Corporates invariably opt for fire cover. They would ultimately stand to benefit but the declining tariff is not good for the industry," an industry source told Business Line, adding that insurance companies by and large made profit from the fire portfolio.

"A sharp reduction in the premium from a profitable portfolio could affect the bottomline. The insurers have so far been sharing profits from their investment in this portfolio. They would probably start selling their investments, but the impact of this premium war would be known only after April 1, 2007."

Besides fire, some of the Government-owned units in the general insurance space have also effected a cut in motor vehicle premium.

Industry sources said that the private sector companies would not be able to bear the backlash of this aggressive undercutting of rates.

Lack of awareness

Meanwhile, experts said that the lack of awareness on insurance cover, coupled with the failure to take note of the nuances of the policy, have resulted in several disputes.

Citing an instance, the source said: "A red chilli exporter sought a marine cover before dispatching a consignment to Sri Lanka. The insurance company provided the cover, but there was a clause that stated that the goods should be transported in a container and in a liner vessel.

"Further, the `contamination' cover was not included in the policy. Incidentally, no liner vessel operates between India and Sri Lanka. The goods on arrival at the destination port were found to be contaminated. The claim is under dispute."

Stating that such exclusions were not unheard of in fire policies, the source said that agents and brokers would have to be trained properly about the various policies and middlemen pulled up in a court of law.

`Most people, including corporate houses, only ask for the rates. They look at everything from a cost perspective. This has to change. There should be a greater awareness about the concept of insurance itself."

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