Thai Reinsurance Firm Alleges Inflated Flood Claims

[webfact]

Reinsurance Firm Alleges Inflated Flood Claims

BANGKOK: -- Thai Reinsurance company is asking for all flood claims to be reviewed as it suspects that some Japanese insurers may have inflated the total damage value to over 450 billion baht.

President of Thai Reinsurance company Surachai Sirivallop has reported that currently all of the foreign-owned reinsurance firms responsible for last year's flood disaster compensation have set up their own teams to investigate the real value of the flood damage.

Some companies have even dispatched up to100 investigators to Thailand just for the purpose.

Surachai said that this is because it has been discovered that there are some discrepancies between the claimed and the actual paid out amounts.

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

He said at the moment, the Japanese insurance companies have already filed claims for 450 billion baht and the figure is still rising.

Surachai said initially, the reinsurance firms estimated the damage at only between 250 and 350 billion baht.

He said more than 60 percent of the claims are filed by Japanese insurers.

Meanwhile, the Office of Insurance Commission has appraised the total value of the flood damage at 450 billion baht, marking a huge gap.

He speculated that the discrepancy may have been caused by some Japanese conglomerates operating in Thailand with cross-holding between the insurance and manufacturing firms, which may have authorized inflated payouts to benefit their own groups.

-- Tan Network 2012-03-28

[pimay11]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

[slapout]

Standard procedure in a natural disaster for companies to send in adjustor (who are familar with the appraisal of the business loss claims) to handle the claims. Guess the Thai company never expected to have to cover losses??? and are too cheap to pay for experts from outside??? Probably never considered sending people to train in Japan a year ago.

[givenall]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

It is funny that i have insurance with SCB and they are paying me 10% of what my claim is and they say they don’t have the money to pay every one and they are sure it is enough so that is all i get. I also asked them to fix the part they cover they said they don’t know anyone.

So I surprise with this kind of attitude , every one tries to rip the insurance company the same way they are trying to rip me off

[Pseudolus]

this accusation, whether true or not might just have huge implications Japanese investment (especially those companies not quite decided to stay here or not). Accuse a Japanese person publicly of acting underhanded they will smile and yes yes yes all the way to another country to invest their money in. Cambodia anyone? Maybe next month Myanmar?

[animatic]

First shot at trying to escape from paying the clients...

but they always are damned if their premium is late...

[geriatrickid]

First shot at trying to escape from paying the clients...

but they always are damned if their premium is late...

If you do not understand how reinsurance works, don't you think it's best if you not say anything?

Reinsurance is placed under a specific contracts. You can look up how it is structured. You are confusing personal insurance with very clear risk management financial contracts.

This isn't about trying to get out of paying, but is most likely tied to how the business interruption indemnity is paid. It's related to the reserves and the accomodations most likely made by the primary insurers, i.e the insurers were going the extra distance for their clients.

The reinsurance treaties will have been triggered once the Cat limits were blown. The direct physical damage would have been adjusted. What could not be paid was business interruption, a loss which must be proven. Business Interruption is most likely placed on a Profits form with a 12 month or longer indemnity period. The insured must prove its loss and with a BI claim it takes time. The insured would have received a partial payment but still had the bulk of the loss outstanding as the loss had not occurred. The BI policies can be structured on a loss sustained basis or on a true Profits basis. An insurance policy does not pay for unrealized gains or BI unless its substantiated and the factories therefore had to post their losses.

The BI losses will be as large or larger than the physical damage portion of the claim. Reserves will have been set up.

in plain language, as the business revenues suffered and additional costs were incurred (Extra Expense, Mitigation of Loss Expense) the BI loss developed. There will be more losses to come. A Profits based BI coverage pays until the level of profits is re-established. This is why an insured completes a business interruption calculation sheet for the current policy term and for the next policy term. The primary carriers may have adopted generous payment terms as they are aware that the reserves would be realized. The indemnity period applies from the the time of the loss, not the policy period. This means that if a policy ran from 1-Dec-2010 to 1-Dec-2011 and the loss occurred 30 Nov-2011, the indemnity period of 12 months would apply until 30-nov-2012 even though the policy had expired.

Business Interruption isn't a common coverage in Thailand and it is most likely the Thai reinsurers doesn't fully understand the underlying ceding insurance policy's reserving. Perhaps if Thailand allowed a more open insurance market there wouldn't be such whining. To date the same allegations have not been made about Japanese insurers and their reinsurance on the tsunami. Munich Re, Swiss Re and multiple London syndicates were walloped with massive claims.

Edited March 28, 2012 by geriatrickid

[geriatrickid]

double

Edited March 28, 2012 by geriatrickid

[geriatrickid]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

It is funny that i have insurance with SCB and they are paying me 10% of what my claim is and they say they don’t have the money to pay every one and they are sure it is enough so that is all i get. I also asked them to fix the part they cover they said they don’t know anyone.

So I surprise with this kind of attitude , every one tries to rip the insurance company the same way they are trying to rip me off

You are confusing a personal insurance contract with a reinsurance contract. Reinsurance policies are risk management tools. They are specifically written and do not cover what a personal lines policy covers. Did your personal insurance policy cover the peril of flood? I would be surprised if it did as personal residential policies usually do not. If the peril was not insured, that is why only 10% of the loss is covered. In most countries, flood insurance is the exclusive domain of a specific government associated fund. Many perils are not insured under a personal policy such as terrorism, flood and in some regions windstorm. That is why there was a terrorism pool in the UK, a national flood insurance program in the USA, and nuclear insurance pools around the world.

A personal insurance contract is a risk transfer. The policy holder pays someone to accept its risk and the risk is spread out amongst the many. The party accepting the risk sets a cost for the risk accepted and says what risks it is willing to accept. This is set out in the policy contract. As a contracting party, it was your obligation to read the policy and to know what was covered. You were not unfairly treated if the peril of flood was not insured.

[bigbamboo]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

It is funny that i have insurance with SCB and they are paying me 10% of what my claim is and they say they don’t have the money to pay every one and they are sure it is enough so that is all i get. I also asked them to fix the part they cover they said they don’t know anyone.

So I surprise with this kind of attitude , every one tries to rip the insurance company the same way they are trying to rip me off

You are confusing a personal insurance contract with a reinsurance contract. Reinsurance policies are risk management tools. They are specifically written and do not cover what a personal lines policy covers. Did your personal insurance policy cover the peril of flood? I would be surprised if it did as personal residential policies usually do not. If the peril was not insured, that is why only 10% of the loss is covered. In most countries, flood insurance is the exclusive domain of a specific government associated fund. Many perils are not insured under a personal policy such as terrorism, flood and in some regions windstorm. That is why there was a terrorism pool in the UK, a national flood insurance program in the USA, and nuclear insurance pools around the world.

A personal insurance contract is a risk transfer. The policy holder pays someone to accept its risk and the risk is spread out amongst the many. The party accepting the risk sets a cost for the risk accepted and says what risks it is willing to accept. This is set out in the policy contract. As a contracting party, it was your obligation to read the policy and to know what was covered. You were not unfairly treated if the peril of flood was not insured.

I don't often agree with the 'old boy' (!) but he knows what he's talking about here.

[MAJIC]

Sounds like they don't want to pay out the Japanese claims,wouldn't you just know,sending in the insurance assessors can

only mean one thing,they will do everthing they can to reduce the payout.

Whenever I have had a car accident,they paid out quite cheerfully,and guess what ? it was always an American Company that paid out.

Edited March 28, 2012 by MAJIC

[wintermute]

Ah yes Thai insurers trying to cheat foreign businesses who ate tremendous losses during the flood. Move along nothing to see here.

[Unkomoncents]

As expected, the Japanese are surely to blame. Their reputation in business demonstrates a clear discrepancy with that of the Thais (who, by holy, mighy LORD, are kings of all sois and cannot possibly have been ignorant/repugnantly-dishonest). This accounting via the Thai government comports well with the other day's article describing the government's accounting for their free emergency healthcare-for-all plan. It's like teaching blind people to drive. They have the heart but not really, because they can't even contemplate the significance of what it is they do (on a daily basis). Anyways, I hope the officials recognize that the Japanese are completely, like, insane. They don't understand numbers and (*flash* Apple commercial *flash*) and...wait...oh...I forgot what I was doing (I'm in Thailand). Oh yeah, if they don't pay the insurance claims, it will be good for Thailand. Also, North is really South and vice versa...I'm actually named Mickey Mouse and I was born in Fantasia.

[noitom]

It's surprising that the Thai insurance companies don't claim act of god and reject all the claims. They can initiate a big hustle of the Japanese and other foreigners. The Thais can 'interpret" the fine print the way that Thais do. The Thai shuffle. They shuffle and reshuffle the military and the government all the time. They are the masters of the reshuffle. Just reshuffle the insurance policies.

[wintermute]

It's surprising that the Thai insurance companies don't claim act of god and reject all the claims. They can initiate a big hustle of the Japanese and other foreigners. The Thais can 'interpret" the fine print the way that Thais do. The Thai shuffle. They shuffle and reshuffle the military and the government all the time. They are the masters of the reshuffle. Just reshuffle the insurance policies.

You would see a total collapse of foreign investment. Probably along the lines of how foreign investment stopped putting money into the Philippines after many foreign businesses got cheated from the government there.

At this point you'd have to be crazy to invest any real money into factories in the countryside. No insurance, no international insurance, no government accountability. Even if the business is profitable on paper and for a few years at least you could eat total losses from various Thai government ineptitude. Not worth it at all.

Edited March 29, 2012 by wintermute

[Thai at Heart]

It's surprising that the Thai insurance companies don't claim act of god and reject all the claims. They can initiate a big hustle of the Japanese and other foreigners. The Thais can 'interpret" the fine print the way that Thais do. The Thai shuffle. They shuffle and reshuffle the military and the government all the time. They are the masters of the reshuffle. Just reshuffle the insurance policies.

You would see a total collapse of foreign investment. Probably along the lines of how foreign investment stopped putting money into the Philippines after many foreign businesses got cheated from the government there.

At this point you'd have to be crazy to invest any real money into factories in the countryside. No insurance, no international insurance, no government accountability. Even if the business is profitable on paper and for a few years at least you could eat total losses from various Thai government ineptitude. Not worth it at all.

The areas north of Bangkok are going to slowly wither and die. No one in their right mind would invest or re-invest in a factory there. They will relocate within country or move out.

[Payboy]

Appraisers will normally pass all claims in return for the usual backhander. Timing is right, then they can head straight to the motorshow for the next beemer.

[madmitch]

Sounds like they don't want to pay out the Japanese claims,wouldn't you just know,sending in the insurance assessors can

only mean one thing,they will do everthing they can to reduce the payout.

Whenever I have had a car accident,they paid out quite cheerfully,and guess what ? it was always an American Company that paid out.

If you think insurance companies just pay the amount demanded by the insureds without investigating then you are very naive.

Any major loss will have loss adjusters involved. Their job is not to reduce the payout, it's to ensure that the correct amount is being paid.

It is not in any insurer's interest to inflate the amount of a claim in order to collect more reinsurance as they have to pay out in the first place.

There will be almost certainly be 'captive' insurance companies involved due to the size of the companies involved, especially those in the car industry, but captive insurance companies are run independently from the parent companies and are subject to stringent controls in order that they don't inflate claims. If they obtain a reputation for falsifying claims, then they won't get reinsurance cover; it's as simple as that.

Geriatric Kid's first comment sums it up very well. At the moment most of the BI element of the claims will not have been paid, simply reserved, and the final figure may or may not reach the reserve amount.

Reinsurance contracts have built in controls to ensure that the correct amounts are claimed. It's quite unusual for reinsurance companies to 'second-guess' the original payments but they do have the right to investigate themselves. They also have the right to inspect any records held by the original insurers, which is generally a more useful tool as by the time a second set of assessors arrives, most of the physical damage will have been cleaned up.

[harrry]

Too much stonewalling is going to make people think again about investment in Thailand.

[timewilltell]

BANGKOK: -- Thai Reinsurance company is asking for all flood claims to be reviewed as it suspects that some Japanese insurers may have inflated the total damage value to over 450 billion baht.

So he is saying his reinsurance firm is paying the Japanese Insurance firm too much money as they have inflated the claim from the insured?

President of Thai Reinsurance company Surachai Sirivallop has reported that currently all of the foreign-owned reinsurance firms responsible for last year's flood disaster compensation have set up their own teams to investigate the real value of the flood damage.

Is he saying his company hasn't bothered then? If so maybe it should!

Some companies have even dispatched up to100 investigators to Thailand just for the purpose

Is that a surprise?.

Surachai said that this is because it has been discovered that there are some discrepancies between the claimed and the actual paid out amounts.

So he just has to do the same to uncover the scam and prosecute then presumably?

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

So they just have to check the final payout cheque to the insured to check that out - doesn't seem too difficult!

He said at the moment, the Japanese insurance companies have already filed claims for 450 billion baht and the figure is still rising.

Surachai said initially, the reinsurance firms estimated the damage at only between 250 and 350 billion baht.

He said more than 60 percent of the claims are filed by Japanese insurers.

Meanwhile, the Office of Insurance Commission has appraised the total value of the flood damage at 450 billion baht, marking a huge gap.

What does this mean? The Office of Insurance Commission says 450 billion - reinsurance say 250 - 350 billion INITIALLY - maybe trying to protect their stock price before the final figures are known so underestimate is good for them.

He speculated that the discrepancy may have been caused by some Japanese conglomerates operating in Thailand with cross-holding between the insurance and manufacturing firms, which may have authorized inflated payouts to benefit their own groups.

So he needs to investigate the insurance companies by sending some investigators to check out the fraud then if that is the case - right?

I don't quite get his point unless it is to demonstrate that some Japanese Insurers might be trying to hang one over his reinsurance company by manipulating the figures where there is some cross-holding between the insured and the insurer except one would have thought that sort of connection would be something that would have to be declared in any proposal form from a competent firm?

[DGS1244]

Thai Re. do not want to pay anything because they don't have any money, the 7% retention that they were quite happy to collect off previously paid premiums has long disapeared. Unfortunately the Japanese companies all want 'New for Old' and are resisting any reconditioning or recovery of thier machinery, result one long legal battle ahead. The Loss Adjusters are doing their best to control the situation but when you are dealing with probably the largest amount of claims from one incident ever then there just not enough of them in the world to help.

[x5david]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

Can't agree more...in addition, I see the reason Honda decided to stick around...making a little off the insurance claims perhaps...

[sparebox2]

Thai Re. do not want to pay anything because they don't have any money, the 7% retention that they were quite happy to collect off previously paid premiums has long disapeared. Unfortunately the Japanese companies all want 'New for Old' and are resisting any reconditioning or recovery of thier machinery, result one long legal battle ahead. The Loss Adjusters are doing their best to control the situation but when you are dealing with probably the largest amount of claims from one incident ever then there just not enough of them in the world to help.

Japanese do not cheat.

Thailand is a very corrupted country, and we all know that.

[DGS1244]

Thai Re. do not want to pay anything because they don't have any money, the 7% retention that they were quite happy to collect off previously paid premiums has long disapeared. Unfortunately the Japanese companies all want 'New for Old' and are resisting any reconditioning or recovery of thier machinery, result one long legal battle ahead. The Loss Adjusters are doing their best to control the situation but when you are dealing with probably the largest amount of claims from one incident ever then there just not enough of them in the world to help.

Japanese do not cheat.

Thailand is a very corrupted country, and we all know that.

Define 'cheat' They (Japanese Companies) are qite happy to make money from the insurance by making 'improvements' without having to pay for it. and most of the large Japanese insurers are part owned by the companies they insure anyway. What it that but cheating?

[madmitch]

probably the largest amount of claims from one incident ever

I don't think so, unless you are purely talking about Thai Re's involvement.

And is it one event? Or several? Catastophe reinsurers will be working with their legal advisors to ascertain this.

Edited March 30, 2012 by madmitch

[blackthorn2005]

Moreover, some Japanese insurers are suspected to have inflated the damage value without proof.

Well now let's see. A common practice here in Thailand is suspected to be carried out by a foreign investor. Absolutely can't have this.

It looks like maybe the shoe is on the other foot for a change.

Absolutely right, it is part of the culture here!

[blackthorn2005]

First shot at trying to escape from paying the clients...

but they always are damned if their premium is late...

If you do not understand how reinsurance works, don't you think it's best if you not say anything?

Reinsurance is placed under a specific contracts. You can look up how it is structured. You are confusing personal insurance with very clear risk management financial contracts.

This isn't about trying to get out of paying, but is most likely tied to how the business interruption indemnity is paid. It's related to the reserves and the accomodations most likely made by the primary insurers, i.e the insurers were going the extra distance for their clients.

The reinsurance treaties will have been triggered once the Cat limits were blown. The direct physical damage would have been adjusted. What could not be paid was business interruption, a loss which must be proven. Business Interruption is most likely placed on a Profits form with a 12 month or longer indemnity period. The insured must prove its loss and with a BI claim it takes time. The insured would have received a partial payment but still had the bulk of the loss outstanding as the loss had not occurred. The BI policies can be structured on a loss sustained basis or on a true Profits basis. An insurance policy does not pay for unrealized gains or BI unless its substantiated and the factories therefore had to post their losses.

The BI losses will be as large or larger than the physical damage portion of the claim. Reserves will have been set up.

in plain language, as the business revenues suffered and additional costs were incurred (Extra Expense, Mitigation of Loss Expense) the BI loss developed. There will be more losses to come. A Profits based BI coverage pays until the level of profits is re-established. This is why an insured completes a business interruption calculation sheet for the current policy term and for the next policy term. The primary carriers may have adopted generous payment terms as they are aware that the reserves would be realized. The indemnity period applies from the the time of the loss, not the policy period. This means that if a policy ran from 1-Dec-2010 to 1-Dec-2011 and the loss occurred 30 Nov-2011, the indemnity period of 12 months would apply until 30-nov-2012 even though the policy had expired.

Business Interruption isn't a common coverage in Thailand and it is most likely the Thai reinsurers doesn't fully understand the underlying ceding insurance policy's reserving. Perhaps if Thailand allowed a more open insurance market there wouldn't be such whining. To date the same allegations have not been made about Japanese insurers and their reinsurance on the tsunami. Munich Re, Swiss Re and multiple London syndicates were walloped with massive claims.

Get a life!