Renewal premium remains flat despite hike in motor, CAT covers

Despite a hike in catastrophic and third-party motor cover, general insurance industry is not laughing their way to the banks as premium for other segments remains flat if the renewals are any indication.
The general insurance industry has renewed around Rs 75,000 crore business on April 1, the first day of the new fiscal year 2016-17, at the previous year's premium levels, says market sources.
United India Insurance Chairman and Managing Director Milind Kharat said normally, around 80 per cent of our business gets renewed on April 1.
Market leader New India Assurance said there has been a premium hike of 10-15 per cent in fire portfolio due to higher premium charged for natural catastrophic risks but "the rates have remained flat in segments like marine and health insurance which are the larger segments for the industry."

"The premium for natural catastrophic risk has gone up because of higher losses the industry has suffered in last three years on account of a series of natural disasters," New India Assurance chairman and managing director G Srinivasan told PTI.
According to National Insurance Company Chairman and Managing Director Sanath Kumar, "there has been an agreement among insurers that the catastrophe cover should go up, in the aftermath of regular such perils striking the country, the last one being the Chennai floods."

"This increase, to the extent of 50 per cent has already come into effect. Since this category is only a portion of the total property premium, the effect would not really affect the customers," he said.

The pricing, especially in group health insurance and properties have remained soft for some time. We do not see any sudden escalation in this. This is influenced by the continued softening of reinsurance market and also intense competition in the domestic market. The regulated pricing for the motor third party segment has been seeing regular increase. Still, the segment is not contributing to any profits, Kumar said.
With several catastrophes happening in the country during the past three years - Uttarakhand floods, J&K floods, Hud-Hud cyclone, Chennai floods - and certain other catastrophes in other countries like Nepal, the catastrophe pricing may be constrained and has risen, Kharat said.

"In the light of the unusual number of natural calamity events that have plagued the country in recent years and the losses incurred therein, we will see a revision in the pricing for such covers," Bajaj Allianz General Insurance managing director and chief executive Tapan Singhel said.
A recent report by Allianz Global said the country's exposure to floods is very high and that Mumbai and Kolkata are amongst the top 10 cities by assets exposure to coastal flooding.
"The domestic general insurance industry has not seen any correction in pricing since de-tarrifing and we do not see an immediate change in the near future as well.

"The idea behind de-tariffication was to bring in healthy competition, however, over the years it has led to a price war which will not be sustainable for the industry in the long run. The need of the hour is to bring in rationalization," Singhel said.