Poor up­take of prop­erty in­sur­ance de­spite storms

SET­TLE­MENT SNAG: Un­paid pre­mium in prop­erty poli­cies im­per­ils speedy set­tle­ment of claims

Oman Daily Observer - - BUSINESS - CON­RAD PRABHU MUS­CAT, OCT 13

With Trop­i­cal Storm Luban — down­graded from a Cat­e­gory 1 cy­clone early yes­ter­day — bear­ing down on Oman’s south­ern coast, few lessons have been learned by the own­ers of pri­vate res­i­den­tial prop­er­ties and farms whose hold­ings were bat­tered by Cy­clone Mekunu barely five months ago, ac­cord­ing to in­sur­ance ex­perts.

“We haven’t seen any uptick in prop­erty poli­cies since Mekunu dev­as­tated Salalah and parts of Dho­far Gover­norate last May,” said a well-es­tab­lished Mus­cat-based in­sur­ance bro­ker, who did not wish to be named in line with com­pany pol­icy. “Lack of aware­ness of the im­por­tance of in­sur­ance cov­er­age is pri­mar­ily to blame, but equally, few of these prop­erty own­ers did imag­ine that a new nat­u­ral disas­ter in the form of Trop­i­cal Storm Luban would hit them so close to Mekunu. Luban has caught many by sur­prise,” the vet­eran in­dus­try ex­pert told the Ob­server.

Cy­clone Mekunu, which rav­aged Dho­far Gover­norate in the last week of May this year, had gen­er­ated hun­dreds of prop­erty, en­gi­neer­ing and ve­hi­clere­lated claims, ac­cord­ing to the Cap­i­tal Mar­ket Au­thor­ity (CMA), which is the reg­u­la­tor of the in­sur­ance sec­tor. In­sur­ers were hit with claims to the tune of around $200 mil­lion barely a month since the storm, with of­fi­cials warn­ing that the ag­gre­gate fig­ure was ex­pected to spi­ral when all of the claims were fi­nally in.

Still, the scope and mag­ni­tude of the dev­as­ta­tion has failed to suit­ably gal­vanise prop­erty own­ers into seek­ing in­sur­ance cover against the next nat­u­ral disas­ter, lamented the ex­pert. “Pri­vate (Pic­ture for il­lus­tra­tion) prop­er­ties and agri­cul­tural hold­ings po­ten­tially im­per­illed by trop­i­cal storms and flood events re­main largely unin­sured in the Salalah area de­spite Mekunu’s im­pact. Prop­erty own­ers are not tak­ing the threat from nat­u­ral dis­as­ters very se­ri­ously — from the in­sur­ance stand­point. They are also not very heed­ful of the fact that the fre­quency of these events will in­crease, while the de­struc­tive im­pact will grow as well. Go­ing for­ward, due to the ef­fects of global warm­ing and the El Nino phe­nom­e­non, we are likely to see more and more of these de­struc­tive events and at un­pre­dictable tim­ings.”

Ad­di­tion­ally, many prop­erty own­ers who suf­fered dam­age in Cy­clone Mekunu’s wake have yet to fully re­cover from the pre­vi­ous storm, ac­cord­ing to the ex­pert. With their ef­forts cur­rently fo­cused on re­ha­bil­i­tat­ing their hold­ings, they have nei­ther the re­sources nor the in­cli­na­tion to think about in­sur­ance cov­er­age, he ex­plains.

In re­sponse to the CMA’S urg­ings, in­sur­ance com­pa­nies in the Sul­tanate have been scram­bling to speed up the pro­cess­ing of claims stem­ming from Cy­clone Mekunu. But a sig­nif­i­cant snag is caus­ing de­lays in the ex­pe­di­tious set­tle­ment of some prop­erty-re­lated claims in par­tic­u­lar, it is pointed out.

The short­com­ing hinges on pre­mi­ums that were left un­paid by pol­icy hold­ers tak­ing ad­van­tage of lib­eral credit terms of­fered by in­sur­ance com­pa­nies amid fierce com­pe­ti­tion in the sec­tor. In the up­shot, rein­sur­ers have balked at set­tling claims when the in­sured was found to be in breach of the Pre­mium Pay­ment War­ranty (PPW) clause — fail­ure to pay pre­mi­ums within the al­lot­ted time­frame.

An in­sur­ance ex­ec­u­tive ex­plained: “When we sell prop­erty in­sur­ance, we get it rein­sured through rein­sur­ers. Un­der this ar­range­ment, pre­mium is col­lected from the in­sured party upon which pay­ment is made to the rein­surer.

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