Vehicle owners will have to shell out a higher amount as third party insurance premium from the next financial year. In a bid to prepare the four state-owned general insurers for better valuation for disinvestment purpose, the finance ministry has asked the Insurance Regulatory and Development Authority (Irda) to allow a higher hike than usual in annual rise of the premium in the wake of huge losses being suffered by general insurance firms.
General insurance companies are now sitting on losses of Rs 4,000-5,000 crore on account of in third party motor insurance business. Top officials of the ministry of finance headed by financial services secretary Hasmukh Adhia had met the CMDs of public sector insurance companies in Hyderarbad last week to review their performance following the promulgation of the Insurance Ordinance facilitating the disinvestment of public sector general insurers. Irda chairman TS Vijayan had also participated in the Hyderabad event.
The chairman of a general insurance company confirmed that after being briefed about the losses on account of third party motor insurance portfolio, the ministry officials took up issue with the Irda and asked the insurance regulator to allow a higher hike in third party motor premium. As part of the existing formula, Irda which regulates and revises the third party premium every year is expected to announce the new third party rate before the new fiscal starts. Though the general insurers ask for a higher hike every year, IRDA only allows a moderate hike.
“Premium will go up this year. We have to wait and see the quantum of the rise,” said G Srinivasan, CMD, New India Assurance. On whether underwriting losses will come in the way of having a robust valuation that would make the disinvestments in the general insurance sector smooth, he said, “No it would impact negatively in getting healthy valuation as all these companies have huge reserves and investors know how underwriting losses are not unusual for a general insurer.”