MUSCAT -- Insurers in the city believe house and contents insurance cover for cyclone damages as also the sophistication and use of insurance in general may increase substantially in the wake of the tropical cyclone Gonu that struck Oman on June 6. It is not just the cyclone that people need to concern themselves with, but also the effects of torrential rain and tidal surge. People tend to have a short memory and the first thing they should do is check their insurance to ensure that they are covered for cyclone and storm and tempest-type cover, including tidal surge, say Muscat-based insurers.
Andy Woodward, General Manager, Muscat Insurance Company (MIC) says, "the government is estimating a total loss of over RO 1 billion but it's far too early to say how much of the total is insured. Many of the losses are not insured because home insurance in particular is still not widespread. We really hope that as the public sees MIC and others working to meet their obligations that they will see the value of insurance". Raphael V Parambi, CEO, Muscat Finance Co Ltd (SAOG) and formerly member of OCCI insurance committee, echoes the same sentiments: "The main insurable claims being reported are from loss of assets, especially motor vehicle and household goods. Regretfully, a large number of clients have inappropriate motor vehicle cover and little or no householders cover".
Osama Mohsin Hussain al Musawi of Capital Insurance Services (CIS) says, "we are expecting to receive a few householders contents claims soon. There have been no claims for structural damage in the Muscat area. This does not mean that there is no structural damage". As for the burden on local insurance companies, Parambi says, "the financial impact is reported to be limited in view of the fact that most insurance companies in Oman carry extensive re-insurance and, in effect pass the risks on to the re-insurers". Musavi concurs with Parambi and says, "local underwriter will probably not suffer as much as the foreign re-insurance companies".
Musawi says cyclone claims are by their very nature part of national disasters and "therefore a fund should be set up to cater for claims arising out of such calamities. The fund can take the form of compulsory insurance for homes and vehicles". Most private homeowners in Oman do not have fire and perils insurance. A national insurance fund will be a cheaper way to insure homes and vehicles (where the insurance companies have refused or unwilling to offer cover). But, warns Musavi, people may turn slack if they think that for any future calamity they can rely on the government for compensation and not insure at all.
Peter Drummond, General Manager, Muscat Life Assurance, says there will certainly be a greater awareness of insurance by everyone who has shared the Gonu experience. This should lead customers to pay close attention to the details of their policies as well as the price. Parambi adds, "the cyclone will have one positive impact in that it will provide an impetus to the sophistication of the market, increase the use of insurance by customers and encourage customers to take professional advice. This will give a big boost to the professional insurance companies and intermediaries and encourage other players to upgrade their skills".
In the aftermath of the cyclone, Woodward says, "some companies are increasing prices already and we think that's inappropriate at this early juncture. When we know the final position we'll consider what action we need to take, but this just isn't a priority for us right now". On the issue of insurance with Storm, Tempest and Flood (STF) cover, Woodward says, "MIC holds that comprehensive insurance means comprehensive. We have always included STF in our personal motor insurance policies. All companies use the same government approved policy form for "comprehensive insurance".
In its basic form it excludes STF but the cover can be added on, usually in return for an additional premium. MIC took the view some time ago that if we are issuing a policy that is called comprehensive it should include STF automatically. We do not charge a separate premium but our rates would tend to be a bit higher than companies offering policies excluding STF". Parambi suggests, "the comprehensive insurance should be made truly comprehensive with no hidden exclusions. Authorities have standardised most aspects of the motor vehicle policy and this should be relatively simple". .
On the number of claims, Woodward says, "it's well over 100. We have already agreed settlement with customers on over half of the claims notified to date, and have handed over payment to nearly all of these clients". Musawi says Capital Insurance Services is receiving mostly motor claims, especially from Al Ghubra Area. On the issue of Gonu's impact on the insurance sector, Musawi says, "as brokers we are already seeing stricter underwriting in motor. Some insurers, who previously provided free STF cover, are now charging for it.
Underwriters' reaction will vary from company to company and person to person. Some underwriters will not be willing to provide cover for the flooded area and others will try to take advantage of the situation and make money from it. You will probably see increased rates for a while but when all settles down the competition will start again".
By Hasan Kamoonpuri
© Oman Daily Observer 2007
