With massive undercutting in premiums to corner corporate accounts, ?rogue quotes? have become the order of the day in the Rs 25,000-crore domestic general insurance industry, having in its first annual renewal exercise under a detariffed regime.
Competing general insurers have slashed premium by over 90-95%, particularly in the profitable fire & engineering corporate accounts, to wean away insurance portfolios from each other in the new fiscal which begins Tuesday. Also, both private and public sector general insurers have accused each other of poaching accounts by slashing premium.
Analysts say the fire and engineering portfolio, which had contributed around over Rs 3,500 crore premium, will be reduced to below Rs 1000 crore in 2008-09. Even loss-making accounts have been offered 80% discount.
The Hindustan Organics account has changed hands at just 8% of the last year?s premium while ITC has moved to the private sector from the public sector by cornering a discount of almost 90%.
?The market is moving dangerously. Rogue quotes with massive undercutting are rampant now. By undercutting each other, the general insurance companies are behaving irresponsibly. The way undercutting is taking place, it would be difficult for the insurance regulator to monitor the situation,?? said M Ramadoss, chairman & managing director at state-owned Oriental Insurance. He says his company too has, in some cases, lowered prices to ward off competition.
?Some of the renewal rates do not even cover basic expenses,?? said Swaraj Krishnan, chief executive officer at Bajaj Allianz General Insurance. He says some companies may be violating regulatory norms, as the rates have to be approved by their boards and Irda.