Despite hike in the premiums of mandatory third-party motor insurance policies by insurance regulator Irda, general insurers have said they would continue to record losses in this portfolio.
After debating 80% hike in its proposal earlier, Irda had announced a hike in the range of 10 to 65% for the loss-making third-party motor insurance portfolio with effect from April 25.
Based on responses received on the exposure draft and concerns expressed by various stakeholders during discussions, the Irda has finally notified the revised schedule of premium at about 15% less than what was proposed in the exposure draft for goods carrying and passenger carrying vehicles, said Irda.
Speaking to FE New India Assurance CMD M Ramadoss said the general insurers have been demanding 80% increase in the premium whereas the regulator has made it only 65%.
?It is not adequate as according to a rough estimate, the loss ratio in the third part pool (set up for centralising the premium and losses on account of third party motor claim of heavy commercial vehicles) was as high as 153%. Going by the Irda?s own auditor?s report, it may be as high as 183%. Hence, already there lies a shortfall in our demand,?? he said
However, one good thing about the Irda?s new announcement is that the premium rates will ?be reviewed on an annual basis now, as against the existing system of doing it once in five years. ?So, I can only hope that the Irda may take this fact in account while reviewing the rates a year later. Until it happens, we will continue to suffer losses,?? he cautioned.
Private companies will have to bring in more capital for the pool.
?NIA will ?see a loss of R600 crore on the third party motor front during the current fiscal. It means that we will have to live with losses,?? said Ramdoss.
United India Insurance CMD G Srinivasan also agreed with Ramdoss saying that the industry was expecting a larger increase in the premium rates, but the increase was less. Still, introduction of an annual increase formula was a welcome move.
?It will help customers too as there will not be bulk increase in the premium. Still, we will have to find out how to improve claims management so that claims are under control. Also, we want certain amendments in the Motor Insurance Act and we have already made our recommendations before the government through General Insurance Council,??Srinivasan said
The demands from general insurers include limiting the liability of the insurer, increasing the time limit for the silent claim and above all, limiting the jurisdiction.
?In my company?s case, we have got a solvency margin of 3.5% as of now, which is set to be affected. Also affected will be our profitability. We had kept a reserve of R350 crore against the pool during the last fiscal.
?But the good thing is that the new premium hike will ?come into effect from April 25, which will give us comfort. In cases the premium prices go up, the losses will be low,?? he said.
The head of another private sector general insurance company said that the company had no other ways than continue to incur underwriting losses despite the hikes in the premium. ?Still, I do believe that the Irda ruling covers a large part of the gap,?? he said.?Reliance General Insurance ED & CEO Vijay Pawar said there was ?adequacy of premium now to take care of the losses.
Irda has said insurers are advised to be mindful of the concerns expressed by vehicle owners about both the rates and availability of insurance.
The Irda will treat any complaint of non-availability of insurance or use of methods to deny/delay the client seeking insurance cover, seriously, said Irda chairman J Hari Narayan.