Fire Cover Premiums to Surge due to Rising Claims

Fire insurance premiums are set to rise sharply from this years as large general insurers including ICICI Lombard and Oriental Insurance, withdraw or reduce deep discounts on the covers they provide. The decision comes in response to surging claims and a push for risk based pricing from reinsurance rance companies.

The general insurance industry collected industry collected a total gross premium of 25,666 crore under fire insurance policies in FY2024, a 7.27% growth from 23,936 crore in FY2023.

However, the incurred claims ratio in the segment has soared, deteriorating to 78% in FY2024 from 58% in FY2023, putting a strain on the profitability of insurance companies in this segment.

For years, insurers have offered steep discounts of up to 95% in base fire insurance rates for policies such as Industrial All Risk (IAR) and Mega Risk covers.

The withdrawal of discounts is driven by a series of catastrophic events and rising property values.

While some insurers have withdrawn discounts completely, others have reduced it. Another public sector insurer has reduced the discount to 20- 30% from 95% earlier.

For instance, a company paying a premium of 5 Lakhs earlier may end up paying 7.5 to 12 lakhs, based on insurers ‘claims experience.

However, this move is unlikely to be uniforms across the industry and aggressive players could use this opportunity to gain market share by offering competitive rates.

However, such strategies come with risks, as reinsurers are unlikely to support heavily discounted policies. Reinsurers have also tightened their underwriting rates. If insurers breach pricing norms, their treaties with reinsurers could be jeopardized, limiting their capacity to under write risks.

Meanwhile, low-risk properties with stable claims could see lower changes. Manufacturing facilities, for example, are expected to see premiums rise by 10-20%.

 👇 Please Note 👇

Thank you for reading our article!

If you don’t received industries updates, News & our daily articles

please Whatsapp your Wapp No. or V Card on 8278298592, your number will be added in our broadcasting list.