Life insurers go easy on catastrophes: Mony

Chennai: In a short and snappy telephonic interview, former chairman of General Insurance Corporation of India (GIC) and now CEO, AMP Sanmar Assurance Company, S V Mony discusses the after-effects of 9/11 on the Indian insurance industry.

Prior to his stint as GIC chairman (1991-95) Mony, a mathematics / statistics graduate and a fellow member of the Chartered Insurance Institute, London, headed India's largest non-life insurance company, the New India Assurance Company.

On the Indian public sector general insurer's reaction to the Mumbai bomb blasts in 1993.
At that time, neither GIC nor its four subsidiaries thought about escaping the liabilities; in fact, such a thought never occurred. We only discussed the nomenclature of damages under the policy conditions. The only discussion we had was whether the bomb blasts damage should be classified as terrorist or civil commotion risk.

Looking back, what impact did the 9/11 attacks in New York have on Indian insurers?
Catastrophic losses are not new to general insurance. But the risk of aircraft damage of this magnitude was never in the horizon. General insurers worldover have gone back to their drawing boards to redraw their risk cover strategies. Already the effects are visible. Earlier, the risk of terrorism was offered as an add-on cover. Now it is not so. Similarly, Indian general insurers have decided to form catastrophe reserves with their contributions. How far the corpus will be sufficient to meet a major loss is a question.

On the insured.
The insuring population, unlike earlier times, is going in for full insurance rather than trying to save few thousand rupees by cutting on risk coverage.

The impact on life insurance sector.
On the life insurance side, the risk of urban agglomerate was underestimated, and the risk continues. And on the catastrophic loss potential, the life insurers are taking it easy.

On the lessons for reinsurers.
The lessons will never be learnt. But consolidation will happen in the reinsurance industry.

Can life insurers load their premium if their policyholders work or live in trophy buildings and constructions that are potential terrorist targets?
Theoretically it is possible. But competition will see that such prudent underwriting does not take place.