KARACHI, Jan 17: Car insurance policy holders will be asked to pay Rs1,000 extra, in addition to normal premium to “partly offset” losses on account of compensatory claims against burning and snatching of vehicles in riots on Dec 27 and afterwards.

Insurance industry estimates compensation of about Rs400 million to car owners on account of losses they suffered in the violence.

The losses include 350 to 400 fully lost cars and 1,800 partially damaged vehicles that belonged to individuals, companies and government corporations.

The companies are still gathering information and fear that these losses may still go up.

“Information from the upcountry is still trickling in,” said a senior executive of an insurance company.

The Sindh government has extended the date till Jan 22 to register reports of losses.

According to observers in the insurance market, premium rate on car insurance in Pakistan is eight per cent plus which is said to be one of the highest in the world.

This rate has encouraged paper and fake companies to offer insurance cover to motor cars.

With an additional levy at a flat rate of Rs1,000 on every policy-holder, car owners would be inclined to move towards fake and paper companies.

The Insurance Association of Pakistan (IAP) is reported to have circulated a proposal for levying this extra Rs1,000 charge on every policy-holder of vehicle.

The association has also suggested 25 per cent rise in premium rate of strike and riot insurance policy.

At present, the insurance companies ask Rs1.25 on every thousand rupees sum insured. The proposal is to increase this premium tariff to Rs1.50 on every thousand rupees sum insured.

In another related development, a team of two senior executives of an international reinsurance company has arrived in Pakistan to get first-hand information of the losses suffered by the business in Karachi and others of the country.

The two foreign insurance experts, with their Pakistani partner, a local surveyor company, met the top executives of private and public sector insurance companies.

Under arrangements with local insurance companies, the foreign reinsurance companies share a percentage of compensation. But this sharing of compensation in event of losses suffered in an accident or riot varies from company to company.

Generally, the reinsurance company is expected to share with public sector National Insurance Company losses of more than Rs150 million.

With private general insurance company, the reinsurance company may share compensation for Rs75 million to Rs100 million.

During widespread loot, plunder and arson in the late hours of Dec 27 and thereafter in broad day-light in the following three days, when police and rangers disappeared mysteriously from roads and streets, the miscreants targeted banks, petrol and gas stations, offices, government buildings, railway stations and other installations, factories, vehicles and what not causing losses estimated by President Musharraf at Rs80 to Rs100 billion.

Railways suffered the highest losses estimated at Rs40 to 55 billion. But multi-billion rupees business of Pakistan Railways and its assets do not have any insurance cover and hence the losses suffered would have to be absorbed by the railways.

“It will cover the losses suffered on account of inefficiency, corruption and malpractices of the top railway officials and the employees from top to bottom,” an insurance executive remarked.

“For years together, Pakistan Railways is being run as a fiefdom of politicians and bureaucrats with no accountability and hence no need of insurance cover,” he said.

After railways, the industry has suffered most as scores of factories in Karachi, Kotri, Gharo, Nooriabad and other places were attacked, looted and damaged.

The attackers picked up raw material and production inventory from factories, and insurance companies fear claims in billions. Many such factories, like Colgate, Masoc Exports, Sunflower, are said to have been fully gutted while many others that include many multinationals have been badly damaged. Furthermore, transit cargo either coming or going to or from Karachi Port was looted and set on fire causing losses in millions of rupees.

The insurance industry estimates total compensation of Rs8 to Rs10 billion from the policy holders for the losses suffered in three days. There is a lurking fear that losses may go even further up.