 "Comprehensive motor cover premiums likely to rise")
The Insurance Regulatory and Development Authority (Irda) has limited the third-party premium hike in motor insurance to 9-20 per cent, against a proposal seeking a hike in the range of 20 to 137 per cent. However, the comprehensive motor cover premiums that comprises motor own damage (OD) and motor third-party (TP) cover might be up by at least 30 per cent, since general insurers are planning to raise motor OD premiums.
According to the regulator’s decision, the private car category will see a motor TP rise between 19 and 20 per cent across different categories, including below 1,000 cc (like Alto, Nano), 1,000-1,500 cc and exceeding 1,500 cc. Similarly, in the two-wheeler category, premiums in TP segment have been hiked only by 9-10 per cent as against the proposed 1-45 per cent hike across different categories of below 75 cc, 75-150 cc, 150-350 cc and exceeding 350 cc.2014.
"Though Irda has given a limited hike as opposed to the higher increase sought by the industry, the OD cover prices will increase. On an average, they could go up by as much as 30-35 per cent. This is, because, motor claims and underwriting losses have increased and we need to sustain the business," said a senior executive of a private general insurance company.
In motor insurance, TP cover, which covers the liability of third party during a motor accident is mandatory, while the OD cover that protects the individual from accidents is optional. But, industry experts said several vehicle owners prefer to take a comprehensive cover since it covers both the risks of self and third party claims.
The underwriting official of a state-owned general insurance company said compared to a 20-30 per cent hike last year, this time there is only 9-20 per cent rise. “Especially when the motor TP portfolios of companies are bleeding, a sharper hike was needed. We have no other option but to hike motor OD rates so that business is viable,” the official added.
For goods carrying vehicles, private carriers (other than three-wheelers), motorised two-wheelers used for carrying passengers for hire and motor trade (road risks), Irda has decided to moderate the rate reductions. In four or more wheeled vehicles used for carrying passengers with carrying capacity exceeding six passengers for hire, three wheeled passenger vehicles used for carrying passengers for hire with capacity exceeding 17 people, Irda has decided not to change the current rates.
For the taxi segment (four-wheelers) too, as opposed to a TP premium hike of 144 per cent, only 19-20 per cent hike has been decided upon. Similarly, for the auto-rickshaws (three wheeled vehicles carrying passengers not exceeding six), there is a 10 per cent hike in motor TP premium as against the proposed 27 per cent.
The chief executive of a mid-size general insurer said that since the rate hikes was not as per their expectations, they would have to compensate for it by hiking motor OD rates by at least 20-30 per cent.
In February, the Insurance Regulatory and Development Authority (Irda) in its exposure draft had proposed a steep rise in premiums for 2014-15. In the exposure draft on revision in premium rates for motor third-party (TP) insurance covers for 2014-15, released on Tuesday, Irda proposed an increase of 25-137 per cent for private cars and 1-45 per cent for two-wheelers. General insurance executives had sent a representation to the regulator to consider an increase of 50-60 per cent in motor TP premiums, in view of the rise in loss ratios in the segment.
The commercial vehicle segment has been a constant cause of concern in the motor segment, due to which insurers have sought steep hike in overall TP premiums. Even two years after the third party motor pool for commercial vehicles was done away with, the woes of general insurers are far from over.
Combined ratios for the motor insurance segment stand at 140-150 per cent for the industry, owing to losses in the third party motor segment. A ratio below 100 per cent indicates an insurer is making profits.
Industry players said inadequate price rises in the third party motor segment and incomplete coverage of third-party insurance for those owning vehicles in India have led to high losses. Insurers said the claims ratio was significantly high -- companies paid claims that were 60-100 per cent higher than the premium earned.
The motor TP pricing is not de-tariffed by Irda. The authority considers factors such as cost inflation index notified by the Central Board of Direct Taxes and claims experience of companies while deciding on the premiums.
There is unlimited liability in motor TP policies, meaning that there is no limitation on the size of the claim. Hence, there has been a steady rise in death claims year-on-year. The revised Motor Vehicles Act, which is yet to be tabled in Parliament, limits liability at Rs 10 lakh; which insurers said would help contain losses. Estimates suggest there is an average 15-20 per cent increase in the quantum of claims awarded in TP insurance by courts.
According to the regulator’s decision, the private car category will see a motor TP rise between 19 and 20 per cent across different categories, including below 1,000 cc (like Alto, Nano), 1,000-1,500 cc and exceeding 1,500 cc. Similarly, in the two-wheeler category, premiums in TP segment have been hiked only by 9-10 per cent as against the proposed 1-45 per cent hike across different categories of below 75 cc, 75-150 cc, 150-350 cc and exceeding 350 cc.2014.
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"Though Irda has given a limited hike as opposed to the higher increase sought by the industry, the OD cover prices will increase. On an average, they could go up by as much as 30-35 per cent. This is, because, motor claims and underwriting losses have increased and we need to sustain the business," said a senior executive of a private general insurance company.
In motor insurance, TP cover, which covers the liability of third party during a motor accident is mandatory, while the OD cover that protects the individual from accidents is optional. But, industry experts said several vehicle owners prefer to take a comprehensive cover since it covers both the risks of self and third party claims.
The underwriting official of a state-owned general insurance company said compared to a 20-30 per cent hike last year, this time there is only 9-20 per cent rise. “Especially when the motor TP portfolios of companies are bleeding, a sharper hike was needed. We have no other option but to hike motor OD rates so that business is viable,” the official added.
For goods carrying vehicles, private carriers (other than three-wheelers), motorised two-wheelers used for carrying passengers for hire and motor trade (road risks), Irda has decided to moderate the rate reductions. In four or more wheeled vehicles used for carrying passengers with carrying capacity exceeding six passengers for hire, three wheeled passenger vehicles used for carrying passengers for hire with capacity exceeding 17 people, Irda has decided not to change the current rates.
For the taxi segment (four-wheelers) too, as opposed to a TP premium hike of 144 per cent, only 19-20 per cent hike has been decided upon. Similarly, for the auto-rickshaws (three wheeled vehicles carrying passengers not exceeding six), there is a 10 per cent hike in motor TP premium as against the proposed 27 per cent.
The chief executive of a mid-size general insurer said that since the rate hikes was not as per their expectations, they would have to compensate for it by hiking motor OD rates by at least 20-30 per cent.
In February, the Insurance Regulatory and Development Authority (Irda) in its exposure draft had proposed a steep rise in premiums for 2014-15. In the exposure draft on revision in premium rates for motor third-party (TP) insurance covers for 2014-15, released on Tuesday, Irda proposed an increase of 25-137 per cent for private cars and 1-45 per cent for two-wheelers. General insurance executives had sent a representation to the regulator to consider an increase of 50-60 per cent in motor TP premiums, in view of the rise in loss ratios in the segment.
The commercial vehicle segment has been a constant cause of concern in the motor segment, due to which insurers have sought steep hike in overall TP premiums. Even two years after the third party motor pool for commercial vehicles was done away with, the woes of general insurers are far from over.
Combined ratios for the motor insurance segment stand at 140-150 per cent for the industry, owing to losses in the third party motor segment. A ratio below 100 per cent indicates an insurer is making profits.
Industry players said inadequate price rises in the third party motor segment and incomplete coverage of third-party insurance for those owning vehicles in India have led to high losses. Insurers said the claims ratio was significantly high -- companies paid claims that were 60-100 per cent higher than the premium earned.
The motor TP pricing is not de-tariffed by Irda. The authority considers factors such as cost inflation index notified by the Central Board of Direct Taxes and claims experience of companies while deciding on the premiums.
There is unlimited liability in motor TP policies, meaning that there is no limitation on the size of the claim. Hence, there has been a steady rise in death claims year-on-year. The revised Motor Vehicles Act, which is yet to be tabled in Parliament, limits liability at Rs 10 lakh; which insurers said would help contain losses. Estimates suggest there is an average 15-20 per cent increase in the quantum of claims awarded in TP insurance by courts.