Insurers tell banks to hold back on new flood policies
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Insurance companies have told their bank partners to stop selling flood policies to new customers, as they are adjusting product features and premiums in response to the severe inundation.
Smith Banomyong, an executive vice president of Siam Commercial Bank (SCB), said yesterday that the many unexpected risks from this crisis had made insurers decide to suspend issuing flood insurance in order to review coverage and prices.
Flood-insurance premiums might have to go up to cope with the higher flood risk, he said.
Kris Chantanotoke, an executive vice president at Bank of Ayudhya, does not expect a sharp increase in premiums, since the flood has raised greater awareness about the risks and that should bring in more new customers.
Nearly all home-owners would buy flood insurance after the disaster, he said.
According to the General Insurance Association, less than 1 per cent of households have insurance that covers flood damage.
A Bangkok Bank executive said 99 per cent of its bancassurance customers were protected by flood insurance under an all-risks package for those who purchase mortgage-reducing term assurance (MRTA).
The bank will have to prepare for damage claims, which will be forwarded to its insurance partners.
SCB sells flood insurance to customers who also buy MRTA and first-class auto insurance, but not to new customers interested only in flood insurance.
Smith said the bancassurance industry’s growth target of 20 per cent for first-year premiums might be lowered, partly because many branches had suspended services.
According to the Bank of Thailand, nearly 400 bank branches have closed because of the floods, with nearly 100 belonging to SCB.
First-year premiums during the flood dropped by 50 per cent from the normal situation. Although the fourth quarter is usually the peak season for purchases of insurance policies to take advantage of the tax deduction, this year many consumers may save money for house repairs.
SCB expects its first-year bancassurance premiums this year to be lower than Bt10 billion.
Bank of Ayudhya plans to maintain its first-year premiums at Bt1.5 billion to Bt1.6 billion by focusing more on customers living in unaffected areas.
