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General insurers’ losses may narrow as IRDAI raises third-party motor premium

Motor third party premiums may be hiked between 4-21 percent for two wheelers and four wheelers

May 21, 2019 / 06:58 PM IST
 
 
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The third-party motor premium is set to be revised upward this year after a two-month pause. The premium, proposed to be increased between 4-21 percent for two wheelers and four wheelers, is likely to help reduce underwriting losses in this segment.

A majority of general insurance companies posted an underwriting loss in the motor insurance segment due to an increase in the claims from this segment. On the other hand, sales of passenger vehicles and two-wheelers were merely up 2.7 percent and 4.86 percent, respectively in FY19 (according to SIAM data) which led to a direct impact on the sale of motor insurance.

New India Assurance, for instance, posted an underwriting loss of Rs 563.67 crore in the motor segment for the March quarter of FY19 in comparison to Rs 116.89 crore loss in the year-ago period. For the full year, the underwriting losses rose to Rs 1,528.20 crore which is 2.4 times that of the previous year.

Similarly, for ICICI Lombard General Insurance, the underwriting loss in the motor business stood at Rs 155.49 crore in Q4 compared to Rs 23.36 crore underwriting profit in the same quarter previous fiscal. However, motor insurance saw a 22 percent rise in the premium collection to Rs 6,423 crore in FY19.

"We hope that in some time there is a price increase in motor third party insurance by the regulator. If not, this will impact our loss ratios in FY20," Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance had said during the earnings call.

Motor_TP

Infographics by Ritesh Presswala

While the Insurance Regulatory and Development Authority of India (IRDAI) had earlier in March said the motor rates will be on hold, the high claims ratio has led to this decision. Third party motor insurance rates are fixed on an annual basis by IRDAI based on the type of vehicle, engine capacity and the claims data in that particular category.

Sanjay Seth, Executive Vice President, IFFCO Tokio General Insurance said, "Keeping in line with the prudent underwriting norms, premium rates have to match with claim experience of the industry. Currently, this is not happening in the Third Party (TP) motor insurance segment, especially when claims/losses are going haywire.”

Consumer groups and transport lobbies had expressed concerns about the premium hike for vehicles. This was especially after the rates were increased twice in FY19, once in April and September.

In August 2018, the Supreme Court had mandated the sale of only three-year car insurance and five-year two-wheeler insurance for the third party segment from September 1 onward. This led to a rise in premiums by 2.86-3.08 times and 2.45-5.61 times for new cars and bikes purchased after this date, respectively.

The price hike, however, is not applicable for long-term policies. Further, there is a 15 percent discount for electric vehicles.

M Saraswathy
first published: May 21, 2019 04:00 pm

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