 "Motor insurance business to remain flat over excise duty increase")
The general insurance sector, which had hoped for a revival in this financial year’s last quarter, would likely see a flat period with a excise duty across the vehicles segment.
The sector was pinning its hope on a revival of the sales of automibles in the last quarter, leading to higher purchase of motor insurance policies, which constitute the largest share of non-life premiums. But a rise in prices, thanks to the excise duty, will affect insurance sales, too.
From April to November last year, non-life insurers collected premiums of Rs 23,847.98 crore from the motor insurance segment. Of this, Rs 12539.37 crore came from the own-damage segment while the rest came from the mandatory third party segment.
Motor insurance consists of two segments — own-damage and third party (or TP) cover. While the own-damage covers losses to self during accidents, TP covers liability to a third party caused by a vehicle owner during an accident.
The prices of cars and sports utility vehicles (SUVs) are beginning to soar by five to six per cent with the withdrawal of the excise duty concession in December.
As the excise duty increased by at least four per cent from January 1, across vehicle segments, car prices have shot up by amounts between Rs 15,000 and Rs 1.3 lakh. Besides, other costs such as road tax and value-added tax have made the price increase steeper. While Hyundai, General Motors, Toyota Kirloskar, Honda Cars and Tata Motors have already passed on the increase to customers, SUV segment leaders Mahindra & Mahindra and Nissan are likely to increase prices this week.
Market leader Maruti Suzuki increased prices of its popular models on Tuesday.
According to data from General Insurance Council, for the April to November period, general insurers collected cumulated premiums of Rs 54,959.57 crore, which was up by only 9.2 per cent compared to same period previous year. In 2013, the industry had seen a 12 to 15 per cent growth in premiums. “The industry was hopeful that from January-end onwards, we would see a better growth in car sales. However, the excise duty hike would be a dampener and our premiums would be directly affected. Due to this, a double-digit premium growth for this financial looks difficult,” said the underwriting head at a private general insurance company. There are almost 55 to 60 per cent vehicles on Indian roads that are not insured. Hence, insurers depend on policy purchase from owners of new vehicles for expanding their business.
From April onwards, when there will be a revision in the motor premiums, the rise in vehicle prices will also be taken into consideration.
The general manager at a public general insurance company said the cost of the vehicle is also looked into, while pricing a cover. “In a comprehensive policy — where both own-damage and TP cover are offered — the prices will see a hike with the annual TP pricing revision and also due to own-damage price correction with a car price hike.”
Since motor TP segment is not yet de-tariffed, Insurance Regulatory and Development Authority of India (Idra) increases the premium every year. For this financial year, Irda has hiked premiums in the range of nine to 20 per cent for different categories of vehicles.
EXPENSIVE AFFAIR
- Prices of cars & sports utility vehicles are beginning to soar by five to six per cent with the withdrawal of the excise duty concession in Dec
- Car prices have shot up by Rs 15,000-Rs 1.3 lakh across segments