Existing and new property and fire insurance policy premiums are expected to go up by 10-50 percent starting January 1, as India’s only reinsurance company, General Insurance Corporation of India (GIC Re), has made an upward revision in premiums it collects from non-life insurance companies.
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GIC Re has revised its reinsurance rates for the non-life insurance companies in all the 291 occupancies or segments which fall under property or fire insurance category.
Sources told CNBC-TV18 that increase in rates could significantly benefit GIC Re’s financials.
GIC Re took this step to ensure that the burning or loss cost ratios can be taken into account, which will help the reinsurer reverse the loss ratios in the property insurance segment.
Burning or loss cost ratio is the ratio of estimated cost of future claims on sum insured of a policy.
The move from GIC Re will also cut down the heavy discounts given by various non-life insurance companies to their clients.
Offering discounts to customers is a very common practice in segments like fire insurance, where despite higher claims premiums lower. Discounts help general insurers retain corporate clients and also gain market share, according to the sources.
They said property and fire insurance premiums are expected to see a 33-35 percent increase. GIC Re collected Rs 2,688 crore from property insurance premiums in the third quarter of FY20.
The rise in rates could lead to a 4-5 percent increase in overall premium income for GIC Re, which stood at Rs 9,459 crore in the third quarter of FY20.
When GIC Re hikes premium rates, it directly translates to higher reinsurance premium for the general insurance companies. Eventually, policyholders will end up paying higher premiums, as insurers will pass on the cost to their customers.
First Published: Jan 24, 2020 7:19 PM IST
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