Major non-life insurance to abolish 10-year contract for fire insurance
A major non-life insurance company plans to replace fire insurance with a 10-year contract and replace it with a 5-year one. Disasters such as typhoons and heavy rains have led to a huge amount of insurance payments and a deterioration in income and expenditures. The aim is to shorten the contract period and raise insurance premiums.
Fire insurance covers damage to homes and household goods due to natural disasters such as fires, typhoons, heavy rains, and floods.
Previously, there was a maximum of 36 years of fire insurance, but now a 10-year contract has the longest term, and the premium paid by the policyholder is determined by considering how much disaster will occur in the next 10 years Can be
However, the damages of typhoons and heavy rains are increasing year after year, and the payment of insurance money has been huge, and the income and expenditure of insurance companies has deteriorated.
Therefore, Tokio Marine & Nichido, Mitsui Sumitomo Insurance, Sompo Japan Nipponkoa, and Aioi Nissay Dowa Insurance will no longer have a 10-year insurance policy and will replace it with a shorter 5-year one.
This is because shortening the contract period makes it easier to change the premiums paid by the contractor based on the status of the most recent natural disaster and the amount of the insurance payment.
In the future, discussions in the industry will progress, and it is expected that a review will be made as early as this year. However, given the recent trend of massive damage caused by typhoons and heavy rain, contracts are renewed every five years for subscribers Each time you do so, your premiums may go up.
Insurance premiums continue to rise due to disasters
In the past, there was a long-term fire insurance contract with a 36-year contract, but from October 2015, the contract period has been reduced to a maximum of 10 years, and it is now being considered to reduce it to 5 years. .
Why shorten the contract period? The insurance premium for fire insurance is determined by calculating the probability of a disaster and the expected amount of insurance payment in the future based on the occurrence of natural disasters. The premium is constant during the contract period and does not change until the renewal period.
However, the consequences of a series of catastrophic natural disasters make it difficult to predict the future, and long-term fire insurance is increasing the risk that insurance companies will lose balance.
According to non-life insurance companies, the total amount of insurance paid in the event of a disaster is huge. In FY2018, it was a record high of about 1,660 billion yen. In FY2019, it is expected to exceed 1 trillion yen due to successive typhoon damage.
Premiums are already rising, reflecting a series of disasters. A major non-life insurance company raised premiums by 6% to 7% on a national average last October. It is decided to raise the price further in January next year.
For individuals with insurance contracts, shorter contracts offer more opportunities for renewal. Given the number of disasters, insurance premiums may increase for each renewal for policyholders.