Only a fraction of typhoon insurance claims paid up

Published by rudy Date posted on April 29, 2010

THE government said non-life insurance companies have paid up only a fraction of the total claims made by clients who were hard hit by typhoons Ondoy and Pepeng.

The Insurance Commission said the total claims for the two typhoons reached P13.5 billion but the industry only settled P2 billion so far.

The Philippine Insurers and Reinsurers Association (PIRA) said the majority of non-life insurance companies that deal with natural disasters do not comply with the 0.15-percent minimum catastrophe rate. This rate is used to compute premiums that clients must pay to insure their properties.

There are about 90 insurance firms in the country today.

On the sidelines of the 7th Philippine Non-Life Insurance Summit, Michael Rellosa, PIRA chairman, said insurance firms reduce their respective rates “way below the minimum” or up to 0.7 percent to attract more clients.

The international standard rate for catastrophic events is 0.3 percent.

“But the problem is, if one catastrophic event happens, would there be sufficient money to cover all the claims,” Rellosa told reporters.

By complying with the minimum rate, a company must charge a premium of at least P15,000 a year to insure a P10-million house and lot against typhoon, flood and earthquakes.

But those using the 0.7-percent rate charge only P7,000 for the same property, excluding taxes.

“The potential of catastrophic events is very real and it would happen. The only way for us to safeguard the industry and the insuring public’s interest is to close the gap between the potential cost of the damage and the actual rate being imposed,” Rellosa said.

To arrest the industry’s collapse, PIRA is urging the government to penalize companies that do not meet the minimum catastrophe rate amid the rising number of natural calamities visiting the country.

From January to April 15 this year alone, the Philippines registered a total of 17 tremors with a minimum magnitude of at least 5, the PIRA chairman said.

The industry group has formed a committee—composed of the Fortune General Insurance Corp., Bpims Insurance Corp., Malayan Insurance Co. Inc., Federal Phoenix Assurance Co. and QBE Insurance Group—to press the government to strictly implement the 0.15-percent rule and increase the penalties for those failing to meet this requirement. These firms have signed a memorandum of understanding (MOU) that would be submitted to the agency.

Vida Chiong, Insurance Commission deputy chief, said they would look into the MOU signed by these companies and conduct their own study to reinforce the existing law on the minimum required rate. –KATRINA A. VALDEZ Reporter, Manila Times

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