An empirical study of material damage insurance rates for property risks.
Goh, Chiaw Gek.
Date of Issue1997
College of Business (Nanyang Business School)
Gradual liberalisation and deregulation of the insurance industry present both opportunities and threats. Opportunities exist in the form of improving the efficiency of the sector by providing coverage to the insuring public at the lowest possible cost. Threats exist in the form of competition being unproductive, with insurers undercutting one another in a bid to obtain more premium volume ignoring prudent underwriting norms. Without risk improvement to support low rates, reduction in rates could be dangerous as a major catastrophe may wipe out all reserves. It is therefore important that the insurance rates and incurred loss ratios for the fire business are studied in an attempt to determine whether rate reductions ought be creating adverse effects. We have examined the movement of rates in Singapore, Malaysia, Indonesia, Thailand and the Philippines during the years 1989 to 1995. It was hypothesised that the fire insurance rates in Singapore are the lowest while the incurred loss ratios are comparable, and that while the rates in all the five countries have decreased, the loss ratios have not increased correspondingly.
NANYANG TECHNOLOGICAL UNIVERSITY