India to become sixth largest insurance market in the world in the next 10 ...
According to Mr. S.S. Gopala Rathnam, Managing Director – Chola MS General Insurance, in order to bridge the gap between premiums collected and claims paid by the insurers, a raise in premium amount is needed to sustain the insurance industry which has reached a critical stage. Motor insurers are demanding 5 – 10% hike in third party premiums for private vehicles and 40 – 50% rise for commercial vehicles. This is expected to improve the underwriting performance of the industry. Third party insurance business accounts for 30 – 35% of the total business of the insurers and hence the above hike will benefit the insurance companies who have higher loss ratio meaning insurers had to pay RM3 for death and injury claims for every RM1 paid as premiums. As a result of higher loss ratio industry expects a loss of Rs. 10,000 crores.
Till last year all general insurers pooled their commercial third-party premiums and losses were shared as per their market shares. Earlier there was around 45% of the provision for meeting liability arising out of motor pool before its breakdown is completed, now there is a gap of 30% in claims incurred and premiums collected for this segment.
Currently, there is only a declined pool, which is much smaller in size. Private insurers want I.R.D.A. to do away with even this the next fiscal. However, the regulator is reluctant to do away with the pool completely as it may increase the burden on public sector insurers in underwriting such covers.
According to Mr. G. Srinivasan, Chairman and Managing Director – New India Assurance Company, there should be decline in pool for some more time on account of pendency in modification in Motor Vehicles Act and also on account of the fact that third party cover prices are also not raised sufficiently.
Market regulator Insurance Regulatory and Development Authority (IRDA) had come out with a formula based on inflation and claim experience of insurer to revise premium rates for third party insurance cover across segments. IRDA will meet with insurance companies to discuss the revision of premium rates for next financial year.
Auto Insurance in India is a compulsory requirement for all new vehicles used whether for commercial or personal use. It deals with the insurance covers for the loss or damage caused to the automobile or its parts due to natural and man-made calamities. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability.