Premium rates for fire insurance have risen by almost 30-35 percent over the past year as high claims have led to underwriting losses for insurers.
Fire insurance products cover properties (large and small commercial) against fire and related perils.
Fire-related losses are covered depending on the type of products stored in the property. The rates are worked out basis the type of goods and risks involved. Properties holding highly inflammable product like gas, wires or oil attract more premium.
“We have been forced to increase rates as the fire portfolio has been consistently loss-making. And the premiums will only go up from here,” said the head of underwriting at a general insurance firm.
The loss ratios under fire have crossed 200 percent meaning for every Rs 100 collected as premium, Rs 200 is being paid out as claims.
Both the public sector players as well as private general insurers offer fire insurance. Industry sources said companies are now also looking at conducting inspections at the premises of the clients before offering a product.
“Doing a thorough check will enable us to understand what the associated risks with the company are. This can help design the product better and also charge the appropriate rates,” said the chief executive of a state-owned general insurer.
Whenever a new commercial complex or factory is set up, fire and allied perils is the first insurance policy that is taken up. Fire is the most common hazard and accounts for the highest proportion of claims.
Further, both major and minor claims are payable by insurance companies. Since there is also a rise in the incidents of fraud in the segment, surveyors are appointed to look into suspicious claims filed by businesses or owners.
In sectors like clothing or electronics, a simple case of fire could destroy goods worth crores. Hence, this policy is renewed on an annual basis taking into account the changes in the inventory annually.
“Apart from the routine claims, frauds have also impacted the businesses leading to pushing up the rates,” added the chief of a mid-size private insurer.
Reinsurance companies have also demanded a rise in the premium rates to provide a cover against fire policies to insurers.