There is good news for prospective customers intending to take insurance policies from four public sector companies viz: National Insurance, Oriental Insurance, New India Assurance and United India Insurance. Department of Financial Services of the Ministry of Finance issued a direction that these public insurance companies can determine purchase price for different age groups provided the combined ratio does not exceed 100% and management expenses are inside the limits specified under the Insurance Act. This direction, which will lead to reduction in the premium amount, was taken after these insurance companies made a representation that the previous rules were affecting them. Further this new direction has also removed the cap on 35% of the expenses on third party motor insurance.
Customers to gain from lower insurance premium based on direction from Department of Financial Servi
As per earlier direction issued by the ministry in September 2012 for an insurer under individual health segment acquisition cost should be limited to 15% for age below 35 years, 12% for age between 35 – 45 years and 10% for 45 years and above. Further for third party motor insurance, commission, brokerage, discount or other miscellaneous expenses should not exceed 35%.
According to a senior official from a insurance company, since the companies can fix purchase price based on the age group, customers in long run will be benefited with low premium rates. As per another official, customers in the age group of 20 – 45 years will be most benefited by this direction.
According to an official of one of the insurance companies, on third party motor insurance, with elimination of limit on commission / discount there is a huge potential for increase in sale due to press on from agents and incentives to customers.