Cheaper premiums for natural disaster
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The insurance premium for a newly designed policy taken out against catastrophic flooding, storms and earthquakes will be less than 5 per cent of the insured amount, much lower than the market rate of 8-10 per cent, said a source at the Finance Ministry.
Meanwhile, the Bank for Agriculture and Agricultural Cooperatives (BAAC) wants to merge its existing insurance scheme with the new insurance fund, to take advantage of cheaper premiums.
The government is expected to decide on Thursday or Friday how much it will collect in premiums from insured individuals and businesses under the new policy, said the source.
The Finance Ministry and the Insurance Commission are currently working out the details of a new insurance policy after the Cabinet’s resolution to set up an insurance fund worth Bt50 billion.
“Insurers are demanding high premiums from insured persons, with the current rates between 8 and 10 per cent of insured amounts, while we aim to collect less than 5 per cent,” said the source, adding that the new insurance product would be announced next week.
The government will act as reinsurer, taking premiums from local insurers. Local firms will be required to keep 1 per cent of the insured amount and send the rest to the government insurance fund, resulting in the state assuming higher risks in the event of natural catastrophes such as flooding, storms and earthquakes.
Compensation for flooding is to be limited to 20 per cent of the insurance value, which means each household would be limited to Bt100,000.
Small and medium-sized enterprises would get flood compensation of up to Bt10 million, while large businesses would get as much as Bt200 million.
However, compensation in the event of storms or earthquakes will not be limited, said the source.
The insurance coverage extends to large corporates because the government wants to persuade foreign investors not to relocate their manufacturing out of Thailand.
Boonthai Keawkhuntee, executive vice president of the BAAC, yesterday said the bank also wanted to participate in the scheme.
The bank currently runs its insurance scheme solely for rice farmers.
The advantage of having one insurance fund is that it could be managed much better, he said, adding that insurers had also been demanding high premiums from rice farmers since last year’s unprecedented flooding.
“Insurers are demanding much higher than Bt129 per rai [the rate under the current BAAC scheme]; last year, insurance covered 1 million rai of paddy farms,” he said.
Insurers last year collected premiums from farmers worth about Bt100 million, but they also had to pay claims of around Bt400 million, he said.
Under the BAAC’s current scheme, farmers pay a premium of Bt60 per rai and the government provides a subsidy of Bt69, resulting in a total premium of Bt129, or Bt806 per hectare.
