Chennai floods: says Insurers need to invest in actuarial capabilities
Everyone is shocked after #ChennaiFloods but people, entrepreneurs and government is doing far better job to take back everything to normal. While it’ll take time but here’s a bad news for Insurance companies, Insurance companies are likely to face claims worth Rs1,000 crore. But we read this headline and think like it must be about life, health and property but, we need to understand, it is much more than that.
Insurance companies are likely to face claims worth Rs1,000 crore, mainly due to business interruptions caused by damaged inventory of auto companies in Chennai and nearby areas, which have been experiencing unprecedented rains. This is similar to the claims of Jammu & Kashmir which experienced similar conditions in 2014. You thought of that thing? The companies don’t only insure land, property or your life but also business interruptions or damaging of inventory due to it comes along while you insure a business.
According to a senior General Insurance Corporation (GIC) spokesperson, claims worth Rs500 crore came from losses to shopkeepers and vehicles, and another Rs500 crore is expected to be reported by auto companies based in the south. GIC is gathering information from all insurance companies. Insurance companies are seeing claims under fire policy mainly due to damage to industrial and commercial units, stock, equipment and machineries.
However, business interruption claim has not been triggered yet. “Loss of profit due to business interruption gets triggered only when business gets affected after a disaster,” said an insurance executive. “Here, claims are due to damage to stocks and machinery. Shutting down production is not covered under business interruption.” The claim from Jammu & Kashmir and Uttarakhand was about Rs1,500 crore, while claims from Cyclone Hudhud, which hit Andhra Pradesh last year, was to the tune of Rs4,000 crore. After the deregulation in 2007, insurers have been undercutting each other in most lines of business.
Experts say insurers need to invest in actuarial capabilities to underwrite risk and price it accordingly while companies are focusing on grabbing market share even at a cost that could wipe them out. “The total loss to insurance is expected to be around Rs1,000 crore from loss to property, cargo and inventory,” said an insurance company executive based in Chennai. Bajaj Allianz General Insurance sees claims mainly from property and motor vehicle.
While we are new to all this, I hope I am able to make you understand the point out of this article and also news. You have lot of jobs coming on your side. That’s definitely a best part!