Insurance firms see rise in claims: BT

General insurance companies are bracing for a rise in claims during the economic downturn, as they believe that hard times will lead to an increase in crime rate, reports Business Times.
Preventive maintenance is also likely to take a back seat as companies resort to cost cutting measures in the current economic environment, the General Insurance Association of Malaysia (PIAM) said.
"It is expected that the insurance industry will experience increases in vehicle theft, fire, robbery and other property theft claims," PIAM told via email the business section of the New Straits Times.
The report also had comments from a number of other industry players.
The report goes on:
ACE Synergy Insurance Bhd chief executive officer Raj Nanra added that deteriorating businesses, rising unemployment and crime rate are the most common phenomenon in challenging economic conditions.
"As this happens, it is natural to expect an increase in claims due to business closures and rising car and property theft," he said.
MAA Assurance Bhd's executive vice president of general claims management, Goh Ching On, said insurers expect to see an increase in moral hazards such as fire claims in a depressed economy.
As a result, PIAM said, the industry would normally respond by being more stringent in underwriting control and at the same time more vigilant in claims handling and investigation.
"Risk management measures will also be stepped up to deal with the potential risks factors," the association said.
Nanra added that claims ratio affects the overall capital of a company and ultimately its ability to meet the Risk Based Capital (RBC) requirement.
He said ACE, with an average claim ratio of about 28 per cent for the last five years, has a very strong balance sheet and its liquidity and net loss reserves for paying claims are exceptionally strong.
"In fact, we are well above the minimum capital requirement under the RBC regime," Nanra added.
MAA, with gross claims ratio of 63.1 per cent and incurred claims of RM234 million last year, said it will impose stringent underwriting guidelines by rejecting adverse risks.
For ACE Malaysia, containing rising claims will always remain a challenge and the industry needs to stay alert of changing trends and review existing methods. One way to do it is through education, Nanra added.
"Education will be the cornerstone in efforts to mold a society that frowns on insurance fraud. Society needs to understand, and be constantly reminded, of the high cost implications to business and by extension, to individuals in the community, if fraud is allowed to flourish," he said.
Insurers and adjusters, meanwhile, should ensure that their personnel have integrity, are technically sound and well experienced, Nanra said.