Insurance inquiries surge on gas explosion fears
- Companies yet to identify potential increase in GWP
- House insurance fire covers gas explosions
BY Shenal Fernando
Fears regarding the safety of liquefied petroleum gas (LPG) cylinders following a spate of explosions and fires in kitchens across the island has led to an increase in queries by consumers regarding home insurance policies, according to insurance industry sources.
Speaking to The Morning Business, several insurance industry sources revealed that over the past week there has been an increase in queries by the general public from insurance companies regarding the particulars of their home insurance policies.
However, one of the sources stated that it is too early to identify whether public fears relating to the safety of LPG cylinders will translate to an increase in gross written premiums (GWP).
Public fears regarding the safety of LPG cylinders have arisen following the recent spate of explosions and fires caused by LPG cylinders that has been reported from around the country including from Colombo 7, Weligama, Kandy, Homagama, Ratnapura, Pannipitiya, Nikaweratiya, Jaffna, and Puttalam.
It is well established by precedence in the insurance industry that potential damages caused to the home of an insurance holder by any explosion caused by a LPG cylinder may be redeemed as damages under the home insurance policy for fire damages.
If public fears regarding the safety of LPG cylinders translate to a surge in general insurance premiums written, it would prove to be welcome news to the general insurance providers who have, unlike their life insurance counterparts, experienced a decrease in GWP over the past years. Moreover, according to certain industry sources, their general insurance premiums written are down by over 50% compared to pre-Covid-19 levels.
According to statistics published by the Insurance Regulatory Commission of Sri Lanka, the general insurance segment in 2Q2021 recorded a 5.3% decrease in GWP to Rs. 49.1 billion from Rs. 51.9 billion in 2Q2020. In contrast, the life insurance segment recorded a 29.8% increase in GWP to Rs. 56.2 billion in 2Q2021 from Rs 43.3 billion in 2Q2020.
According to KPMG, the general insurance segment is made up of 12 players, out of which two are composite insurers who are engaged in both life and non-life insurance (Sri Lanka Insurance Corporation and MBSL Insurance Co. Ltd.).
In a recent report on the Sri Lankan insurance industry, KPMG claimed that based on 2020 data, the market leader in the general insurance segment was Sri Lanka Insurance Corporation with an 18.4% share, followed by Ceylinco General Insurance Ltd. which had a share of 17.7%, and Allianz Insurance Lanka Ltd. which had 13.2% share.
The Government has vehemently denied reports and allegations that the butane-to-propane gas compositional ratio in gas cylinders had been changed and led to these explosions.
In addition, both privately owned Laugfs Gas PLC and state-owned Litro Gas Lanka Ltd. have also denied these allegations that the explosions reported stemmed from a change in the composition of the gas contained in their cylinders.
Despite such assurances, the continued widespread reporting of explosions and fires linked to LPG cylinders has prompted not only Opposition MPs but also Government-affiliated MPs to demand for a proper investigation into the composition of the LPG cylinders as well as the quality of the cylinders.
It should be further noted that former CAA Executive Director Thushan Gunawardena had previously disclosed to us earlier this year that test samples from the 18 litre gas cylinder and 12.5 kg gas cylinder of both Litro Gas and Laugfs Gas were found to contain a 50:50 composition of butane and propane.
“This is dangerous for domestic use and we are, therefore, concerned about the safety of the public. The usual composition is 80% of butane and 20% of propane. We have informed the relevant ministries regarding the matter,” Gunawardena told The Morning at the time.
The 18 litre gas cylinder was then removed from market circulation by Litro Gas Lanka. Gunawardena, speaking to the media recently, blamed the gas companies for the recent kitchen explosions.
Yesterday (30 November) in Parliament, the Samagi Jana Balawegaya (SJB) party called for a criminal inquiry over the recent increase in gas explosions. SJB Leader Sajith Premadasa listed out several places where such gas explosions have been recorded and stated that there is now a growing fear amongst the people.
“There is a growing fear amongst the public now, where no one is confident to use domestic gas anymore. There have been over 11 incidents within a span of 48 hours, and this is not to be taken lightly. We strongly believe that the gas cylinder compositions have been altered and the weight has reduced as well. We request for an inquiry to be done regarding this matter,” said Premadasa.
Meanwhile, Leader of the House and Minister of Education Dinesh Gunawardena suggested that a discussion be held with regard to this matter and a Special Parliamentary Consultative Committee meeting has been scheduled by Speaker of the House Mahinda Yapa Abeywardena at 9 a.m. today (1).