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Monday, April 1, 2019

Insurance de-tariffing ! Pricing ~ pet dog costs more than cars to Insure !!

Homogeneity of risk, probability of occurrence, severity, spread, law of large numbers and more .. go into insurance pricing !!

Present bunch of Insurance may be surprised to read that Marine Cargo Insurance for long was considered a profitable business for the Insurers – Apr 1994 sounded a death knell to that perhaps !  In earlier days, the rates and terms of Marine Cargo Insurance was governed by ‘All India Marine Cargo Tariff” and there were only 4 Public Sector Insurers transacting business. For those of you new to Insurance business, a Tariff  is a schedule of premium rates and policy terms and conditions applicable to risk in a particular class of business.  It was the guide book – a stricter and stronger directive given by the TAC to the Four transacting companies and any  any violation of rates, terms and condition as prescribed by TAC in the tariff  literally meant  violation of Insurance Act 1938 itself.  

Viewed in hindsight, the rates were fabulous.  For bagged cargo, for inland transit risks, the Basic coverage (Inland Transit – B) rate would be 0.20% -Underwriters were permitted to add specified perils to this and for tearing and handling losses it was 0.05%; another 0.05% for rain water damage; another 0.05% for shortage and a similar value for non delivery and so on….  – the ‘All Risks’ rate for a non-hazardous cargo (paddy, rice, wheat, sugar, de-oiled bran and the like) in gunny bags would be not less than 0.41% + SRCC rate @ 0.0225%  - thus for 1,00,000/- sum insured, the premium collected would be  closer to Rs.500/- 

No post on Marine Insurance ~ though the truth was hard-hitting, Insurers did not learn .. .. years later there were talks that risks were not being priced adequately – and that one need to distinguish between good and bad risks and .. .. and discount rates for the good !!  ~ so, a decade ago,  Property and Motor Insurance too followed the suit .. .. price war ensued! – the reforms were to promote a free market, risk-based pricing, and a level playing field – but ended up T- .. .. what 100%  

Heard of ~ Cynophobia !  Dogs  -  one of the most adored pets –Dogs are considered man’s best ally and among the most sought after pets ~ to some they bring endless joy and fun. For many, they are too scary….  

Among various General insurance policies, is coverage for pet animals, more specifically dog insurance.   In India, this policy offers coverage to indigenous, crossbred and exotic dogs which are pets, watch dogs, sheep dogs… and provides coverage against death due to accident and / or diseases during the period of insurance to the dogs.   The insured animal must be  suitably identified by  tattooing; nose print; photograph etc., Normal physical identification marks and breed, sex, age etc. should be clearly described in the Veterinary Certificate and Proposal form. The Policy can be extended  to cover transit risks as also accidental poisoning and the like.   There is liability arising out bites too.    Policies would exclude rabies, canine distemper and the like.

In Foreign countries,   there is Dog bite law.  In US most States have statute imposing liability on dog owner for all dog bites, irrespective of whether the dog was a good dog or not.  The victim gets compensation from the dog owners homeowners or renters insurance.  In some places, the liability would ensue only when the owner could be accused of negligence, intentional or violative of a leash law or other animal control law.    There is also some debate on "dangerous" and "vicious"  dogs.  ~ and this can be insured too.  Now comes the news – a MailOnline article that it is so  expensive to insure dogs  that they gulf the premium paid for a 4x4, new research has revealed.

AA insurance's comparison of policy prices found that some breeds are pricier to cover than a family car. It found that a Great Dane, for example, has an annual pooch premium of £1,100. This is twice the cost of insuring a £58,000 BMW X5 SUV for a year.   That means a big German dog is more expensive to cover than a big German motor.  The Great Dane is, according to the analysis, the priciest of pups to insure, but other favourites among pet-loving Britons have also been found to drive sky-high cover charges. In fact, six breeds in total cost more to insure for 12 months than the two-tonne BMW family car - and not all of them are that big. This is according to the AA's pet insurance database, which was compared to the cost of motor cover for relatively popular vehicles. The study looked at pet premiums based on the provider's Gold Plus cover for a one-year-old male dog and premiums for a one-year-old car belonging to a 38-year-old drive with protected no claims.

The AA said there were similarities in the cost of ownership when considering man's best friend and a vehicle. The insurance provider said: 'Most drivers understand that as cars get older, it can cost more to repair them and keep them on the road. 'Similarly, dogs can suffer from age-related illness and can also be susceptible to breed-dependent ailments.' The comparison pitted the Rhodesian Ridgeback against the £40,000 Audi Q5 and found the four-wheeled motor was almost £300 cheaper to cover than the four-legged animal. Another insurance head-to-head was the Giant Schnauzer, costing £599 to insure, and the £40,000 Mercedes-Benz GLC, which rung in at £434.91.  Janet Connor, director of AA insurance said: 'It's important to carefully research the exact type of dog that is right for you and your family and be sure that you are fully prepared to dedicate the time and finances required before you buy.

'With recent trends towards owning exotic or designer dogs and unique cross breeds, it has never been more important for people to consider all of the potential costs associated with dog ownership. 'A premium pooch can end up costing so much more than the original price tag and, over its lifetime, a dog can make a big dent in your family finances.' Last month, the AA said car insurance premiums were once again on the rise following a period of falls.  It said an annual comprehensive car insurance policy for an individual who shops around stood at £610 on average in the fourth quarter of 2018 - an increase of 2.7 per cent over the quarter, but still down 5.9 per cent over 12 months.

City regulator the Financial Conduct Authority last year launched an investigation into how insurers are pricing their premiums. Part of the problem is automatic motor insurance renewal quotes, which are rarely lower than the previous year's premium. If a driver fails to accept them, they have to go through the rigmarole of a price comparison website.  Some users felt that : 'We can see what questions we're being asked, but it's not clear how these are being used to generate a price — or what other factors they are taking into account. 'There are no real boundaries around what's fair — so we're increasingly seeing insurers take questionable decisions on pricing.'

Cynophobia is the abnormal fear of dogs.  It is classified as a specific phobia, under the subtype "animal phobias”. Whether you have mortal fear or not, it makes sense to stay away from an angry dog….

the only dog that I loved is no more !  the lumpen feeling reading the travails of the little Jeeno, in the most interesting Sci-fi of Sujatha -  ‘En Iniya Iyanthira ’  and Meendum Jeano’ -– the story of robotic dog woven subtly around a dictator who keeps the Nation under tight grip. The pet robot dog which can think beyond humans, assists the dumb Nila in search of her spouse Sibi into bigger things.  Towards the end, the cute exceptionally dog loses it memory and back up and fades away ! Illogical it might sound, it was afterall a story – yet,  I felt very sad reading of its end.

With regards – S. Sampathkumar
18th Feb 2019.

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