Minimum rates are floating on social media. Not sure about their authenticity (when an XOL treaty talks of restriction on ceding to the treaty based on minimum rates as per annexure-doubts do arise as to whether what is floating is authentic). Anyway, below comments are assuming that the contents are true.
a) Minimum rates become the maximum rates. Hence, better managed risks will be the losers.
b) Transporters godowns and godowns of C&F agents have a rate of 0.72 per mille. If kept in open, the rate is 0.92 per mille. Compared to rates for CAT III goods storage in godowns at 3.1 per mille and 5.58 per mille if stored in open. Never knew transporters godowns and c&f agents godowns are so good risks to underwrite.
c) A Bus Terminus has a rate of 3,67 per mille. Not sure whether any bus terminus is insured in India and if not from where this rate came in?
d) Tiny sector industries with values at risk not exceeding Rs 10 lakhs has a rate of 0.65 per mille. While circular is not applicable for Sookshma policies.
e) Garment makers have a rate of 0.97 per mille, Spinning mills also have a rate of 0.97 per mille, but Textile composite mills have a rate of 1.65 per mille. Not understood the logic.
Above are few of the aspects highlighted. The idea of this blog is not ask for correction in discrepancies. The idea is to question the very methodology used for arriving a minimum rate.
Whenever, burning cost has to be arrived at, there should be enough loss data. When you bifurcate into almost 300 occupancies, you never get enough loss data. Many occupancies can easily be merged so that the total number of occupancies is around 30. Then, there will be enough loss data to arrive at meaningful conclusions.
