Insurance premiums likely to rise as costs soar

Left unremedied, rising inflation might topple the insurance industry, said Kheedhej Anansiriprapha, chief executive of Axa Thailand.

Under such circumstances, the non-life industry's projected 6-per-cent growth this year looks inadequate, compared with gross domestic product growth of 5 per cent, he said. The loss ratio for the entire non-life industry is now touching 71 per cent, and that means "Code Red".

Kheedej revealed that Axa Thailand's motor-insurance business now had an inflation-adjusted loss ratio of 66.67 per cent - a significant increase from 63.49 per cent - if the 5-per-cent inflation rate was factored out.

Insurers are feeling the pinch as costs spiral out of control. Auto parts, medical bills and service charges have become more expensive in a matter of months.

"The cost to repair a dent in a car may cost Bt5,000 now, but in three months it will be Bt5,500," said Kheedhej. The pressure is mounting.

Some insurers are already late in paying certain garages. According to staff at Bara Windsor Srinakarin's insurance-claim department, the garage has to hold on to cars belonging to Gernali Thailand's clients since the company had failed to settle aggregated payments to the tune of "a million or so" since the beginning of the month. An executive from Generali was not available for comment yesterday.

If inflation increases, according to Kheedhej, an increase in insurance premiums across the board of at a least 5 per cent by the second quarter is inevitable.

Since last year, like other large insurers, Axa has managed to cut its client base of small cars - less than 1,800 cc - to 2 per cent of the total portfolio. These drivers tend to claim the most, said Kheedhej.

The company has been complementing this portion of business by selling more personal accident and health insurance. Axa reported an overall gross premium growth of 16.7 per cent to Bt513 million. Motor insurance made up Bt277 million of the growth.