Property insurance a private transaction

Property insurance a private transaction

I JUST renewed my property insurance and was surprised to find out that the premium had doubled since the last time I paid.

It appears that the Insurance Commission (IC) under Circular No. 21-2010 has “prescribed a minimum rate xxx for risks such as earthquake xxx and typhoon and flood xxx which rates are added to the basic property insurance that usually covers only fire and lightning.” (Underscoring, mine)

Be that as it may, property insurance transaction is a purely private contract between the insurer and the insured. What business then has the government in meddling with this contract, by injecting into it risks neither agreed upon nor even contemplated by the parties? It is clearly undue interference in a private transaction, which cannot be justified by a claim of public policy or under the guise of “for the benefit of all.”

If the purpose is to increase the reserve fund, then by all means, have the premium rate increased, but this should be confined only to the risk agreed upon for coverage, not risks dictated solely by the government for inclusion in the contract which, for all intents and purposes, may not be relevant at all. For example, why should I insure my property for the risk of flood when the area where it stands has not experienced flood for decades? It would be foolhardy to do so, if not downright silly.

If some insurance companies are in default with their commitment to clients, is the Insurance Commission powerless to take positive actions? Why resort to precautionary palliatives (such as including uncomprehended risks in a contract to thereby increase the rates), when punitive action is needed?

Worth mentioning is the fact that an increase of the premium rate on a singularly agreed upon risk may showcase its excessiveness. Masking such excessiveness with dictated additional risks is, to say the least, a dastardly way of providing a reserve fund. Read More