Recurring natural calamities along the east coast, especially Vizag and Chennai, to increase insurance premium rates in the region, reports T E Narasimhan.
Growing concern over the rising natural calamities along the east coast is leading the general insurance players to look at increasing the premium rates for properties, commercial establishments, factories and so forth located in the vulnerable areas, according to sectoral sources.
In the past two to three years, these insurers had to field claims worth Rs 9,000 crore due to natural calamities in this region. These included a cyclone in Visakapatnam (general insurance claims of around Rs 2,500 crore) two years ago, a cyclone in Odisha (claims of around Rs 500 crore), a flood in Chennai during December 2015 (Rs 5,000 crore) and a cyclone in Chennai this month (initial claims of around Rs 1,000 crore).
New India Assurance's chairman G Srinivasan said, "We are a bit concerned. These locations are now seeing natural calamities on a yearly basis. The east coast has become vulnerable, especially Vizag and Chennai."
He added insurers might have to think of appropriate premiums for properties in these areas. And, look into the risks much closer. For instance, locations in Chennai which were affected in the floods last year, were also affected during the cyclone this year.
Risk inspection would be important and the premium based on this. "There is going to be some pressure on the rate in the coming year," he added.
Locations getting hit frequently and where something is inherently wrong will be identified.
"We also end up paying higher cost to the re-insurer. This will lead to increases in the premium for customers in these areas," said Srinivasan.
New India Assurance has received around 350 claims worth Rs 50 crore so far and expects more in the coming days.
Chennai-based United India Insurance said around 250 claims worth Rs 100 crore were reported after the cyclone hit Chennai last week and expects more this week.
An official from the company added that the reinsurance market would be hard for the general insurers, which in turn will lead to increase in prices at the domestic market in these vulnerable areas.
Pankaj Verma, head of claims at SBI General Insurance, echoed a similar view on chances of premium rates going high in the east coast of India stating that it would have bearing on the rates, which would be passed on to the consumers.
Like other insurers, SBI General is also evaluating methods to address the situation. It has so far received claims worth Rs 20 crore.
Small and medium enterprises suffer the most during such calamities. To help them, insurers have started relaxing some documents and started a portion of claims immediately so that they can have their units up and running. Srinivasan and Verma have confirmed that both their companies started doing this for the first time. In SBI, SMEs units get around 50 per cent of their claim upfront so that they can start the units immediately.