Insurance premium may increase due to hardening of reinsurance rates

Property insurance is likely to cost more for large risks with insurance companies anticipating a hardening of rates in the reinsurance markets. Most large insurance covers are renewed in alignment with the financial year, with policies starting from April 1.

For the first time, many non-life insurance companies have decided to link the pricing of fire insurance policies to individual claims experience. According to industry sources, the revision follows the regulator’s directive that rates published by the insurance information bureau need not be treated as a minimum rate.

Linking insurance rates to the track record of a policyholder enables companies to give discounts to a maximum number of customers as claims in property insurance have a low frequency as against motor or health insurance. However, claim experience-based pricing is bad news for anyone who has had a large claim in the last three years. Insurers are doubling rates for those who have reported claims that are more than three times the premium paid.