Tehran High-Rise Inferno Sparks Interest in Property Insurance

EghtesadOnline: Sales and marketing departments of insurance companies have been unusually busy in recent days, as more people are referring to insurers to insure their properties against fire.

News ID: ۷۷۳۶۰۳

31 January 2017

The renewed interest, rare for a society with low insurance penetration like Iran's, has come about at a huge cost: The Plasco building inferno more than a week ago unleashed death and destruction on a tragic scale in the heart of Tehran's commercial area.

The 17-floor commercial high-rise–first of its kind in the Iranian capital built 56 years ago–caught fire and collapsed trapping dozens of firefighters and civilians. More than 500 business units were destroyed and thousands of workers lost their job following the tragic incident.

Insurers, especially the state-owned Iran Insurance Company, started paying claims to policyholders from the early hours of the incident, Financial Tribune reported.

“We have halted selling personal auto policies [which is obligatory for drivers] to focus on fire insurance policies … Many people have come to us for purchasing fire insurance policies,” an IIC agent told Financial Tribune.

Iran Insurance Company has also launched ad campaigns on the state TV and social media promoting its services and offering 10% discount to businesses that purchase fire policies.

Fire insurance category accounted for only 3.88% of Iranian insurance firms’ portfolio during the nine months to November 20. This is while Personal Auto Policies accounted for 37.2% of total premiums generated by insurance companies during the period.

Policymakers have been calling on insurers to shift their focus from PAP to other categories, due to the high payout ratio of the category at 70%.

The payout ratio of fire insurance category was 27% during the same period, according to Central Insurance of Iran’s data.

Plasco Paid Claims

A number of insurance firms are compensating businesses that incurred losses in the Plasco blaze on Jan. 19, with Iran Insurance Company covering the largest portion of the losses.

Each business unit in the building is estimated to have held goods worth 2-3 billion rials ($52,500-78,700). That is while only 25% of businesses located in the building had risk coverage.

Iran Insurance Company had sold fire insurance policies to 125 business units in the building. The company, so far, has paid 128 billion rials ($3.31 million) in claims to 67 cases.

IIC announced that it was assessing the losses incurred by the remaining policyholders.

“We have settled the losses of all businesses that are totally destroyed, but we need official permission to enter the site and study the remaining cases,” director of IIC’s Fire Insurance Department, told ISNA earlier this week, noting that claims will be paid as soon as the officials allow the company to enter the site.

IIC payments are estimated to reach 316 billion rials ($8.19 million) in the coming days.

Asia Insurance Company had sold insurance policies to 53 businesses in Plasco.

“The company has paid 50 billion rials ($1.29 million) to 38 victims,” Asia announced in a statement earlier this week.

The remaining losses will be indemnified soon after experts visit the site, the insurers said.

Asia’s preliminary estimates show that the remaining losses would amount to 35 billion rials ($907,200).

Alborz Insurance Company has received 11 claims regarding the Plasco fire. So far, in three cases, victims have been reimbursed, while the remaining claims are pending, as they require investigation.

Novin Insurance Company, affiliated with EN Bank, paid 860 million rials ($22,200) to settle a single claim in the Plasco incident.