**Life apart, insurers may take big hit

28-Nov-2008

THE damage caused to the heritage Taj Palace and the Trident may turn out to be the first major terror related claim in India. After terrorism was globally made an ‘excluded’ risk post 9/11 by global insurers, there has not been any major terror insurance claim on Indian non-life insurers. Thus far, terrorist attacks in India have resulted in loss of human life and damage to public and government property, while damage to corporate property was minimal.

Non-life insurance companies have received claims worth Rs 1.3 crore on account of terror acts this year so far, while the figure stood at around Rs 1 crore for last year. The claims included personal accident cover — claims submitted by persons who had been injured in bomb attacks. The largest terrorism-related claim in India so far was made by Coca-Cola, for a plant that was blown up by Naxalites.

Many insurers believe that the claims on account of the blasts and the fire that followed at the Taj Palace could be significant. Tata AIG General Insurance is understood to have provided cover to the Indian Hotels Group, which owns the Taj, under a global package.

A senior official at Tata AIG confirmed that there is a cover, but he said, at present, the focus was the well being of people in the hotel. With the terrorists continuing to be holed up in the Taj and the Trident until late Thursday, an assessment of the damage was impossible. Moreover, considering that fires had broken out in the heritage wing of the hotel, the damage could be considerable.

Unlike foreign insurers, who exclude terror risks from their standard property insurance policies, Indian companies cover terrorism. Indian companies are able to provide protection even without reinsurance support because of the creation of a ‘terrorism pool’ seven years ago.

The pool, which initially provided protection up to Rs 200 crore, can now offer cover up to Rs 700 crore as there has hardly been any terror claim. Yogesh Lohiya, chairman, General Insurance, told ET that the pool has been running at a surplus as premium collections have been over Rs 150 crore a year.

Make sure you’re covered for terrorist attacks

THE terrorist attacks in Mumbai have made many wonder if they are covered under their existing insurance policies for such eventualities. There is no one answer to this question and things vary from product to product. A retail insurance buyer would typically buy products from both life and non-life insurance companies. On the life insurance platform, insurers pay the sum assured for basic life insurance in case of death due to reasons other than suicide. In most life insurance products, the basic sum assured is paid to survivors in case of death of the insured due to any reason other than suicide in the first year. A life insurer may refute the claim on the grounds of ‘non-disclosure’ of material information. In other words, life insurers pay the basic sum assured even if the death takes place due to act of terrorism.

However, things change when it comes to benefits under the additional riders bought by policyholders. Life insurers do not pay double-accident benefit if the death occurs due to act of terrorism or war, as it is one of the chief exclusions mentioned in the policy wordings. Major surgical benefit covers only stipulated surgeries and hence no benefit is payable if a policy holder undergoes surgeries arising out of an act of terrorism. Terrorist acts do not fall under the purview of the critical-illness cover. “Waiver of premium benefit is allowed if the insured dies due to act of terrorism,” says Rahul Agrawal, CEO, Optima Insurance Brokers.

For non-life insurance cover, the industry is divided on allowing benefits in case of act of terrorism for individuals covered under personal accident policies. “Most non-life insurers exclude disability or death arising out of war or act of terrorism,” Mr Agrawal said, adding, “there is no provision to add terrorism cover to the existing personal accident insurance cover.” “Though there are some non-life insurers offering ‘terrorism cover’ under policies, it makes sense to confirm the same by checking the list of exclusions,” says a veteran actuary with a public sector insurer.

For property cover, the terrorism cover is optional. “Prospective policy buyers would be better off comparing the benefits, including the terrorism cover, while buying the property insurance,” warns the actuary.

Source : www.insuremagic.com