Firms renew policies at 60% discount

Around 25-30 per cent of corporate insurance policies that come up for renewal on April 1 have secured discounts in excess of 60 per cent. The move follows the Insurance Regulatory & Development Authority (Irda) allowing non-life insurance companies full pricing freedom from January 2008.

In addition, local underwriters have managed to offer better rates as global reinsurers are going through a lean phase and the Indian business is looking attractive.

According to the data released from Irda, during April-December 2007, buyers of property insurance covers "" corporate and retail "" have witnessed a gross 25 per cent drop in premiums. The general insurance industry has given a total benefit of Rs 974 crore on property covers during in the first nine months of the financial year due to detariffing.

The nine months were the period where Irda had partially lifted price controls on fire, engineering and motor portfolios. Insurers could offer discounts of up to 51.25 per cent of the erstwhile tariff rates on individual rated products (those risks for which the sum insured is more than Rs 10 crore), up to 43.75 per cent in the case of class-rated products (those risks for which the sum insured is less than Rs 10 crore) and 20 per cent on motor own damage for private vehicles. From January 2008, full pricing freedom was given. 
 

BIG BONANZA Gross premium underwritten by insurers
Rs crore Segment	April-December
	2006	2007
Fire	3,482.13	2,856.62
Engineering	1,011.63	1,051.30
Marine	1,259.73	1,359.38
Motor	7,526.41	9,204.72
Health	2,268.52	3,558.84
Aviation	281.20	218.79
Liability	368.83	426.91
Personal accident	462.28	531.42
Others	1,912.68	1,588.43
Total	18,573.41	20,796.43

According to the data released by Irda, for the nine months of the financial year, non-life insurance industry has registered a drop of 18 per cent on the gross fire premium underwritten at Rs 2,856 crore as against a gross fire premium of Rs 3,482 crore for the nine months of 2006-07.

Fire portfolio had been growing around 10 per cent prior to detariffing which makes the total loss for the industry in fire portfolio at Rs 974 crore indicating that on a gross basis the premium rates have fallen by 25 per cent.

Although Irda had increased the mandatory third-party premium rates for motor policies by 70 per cent on commercial vehicles, the motor third-party premium portfolio grew by 55 per cent for the nine months of the financial year with a gross premium of Rs 3,154 crore. Insurance officials pointed out that a large number of vehicles had stopped buying the mandatory third-party insurance following the hike in premium rates.

Since the lifting of price controls from January 2007, insurers cut the premium rates for motor own damage by 20 per cent. However, due to an increase in the number of new vehicles, the motor own damage segment registered a 10 per cent growth.

Engineering insurance portfolio for the industry grew marginally by 4 per cent with a gross premium of Rs 1,051.30 crore as against a gross premium of Rs 1,011.63 crore. Health insurance portfolio grew by 57 per cent for the nine months with a gross premium of Rs 3,558.84 crore as against a premium of Rs 2,268.52 crore.

Says K N Bhandari, the secretary general of the General Insurance Council, "Consumers have got the benefit of detariffing, which was intended to bring a correction in the price of insurance covers. The fire and engineering premium rates in India were not in sync with the international rates. The entire global market is in a soft cycle and therefore the price of property insurance worldwide is witnessing a downside."

"A few good risks may have been given over 50-60 per cent discounts but the average discounts have been around 25 to 27 per cent on an aggregate basis," he added.

During April-February 2007-08, the non-life insurance industry grew by 12 per cent for the eleven months of the financial year (April to February) with a gross premium underwritten at Rs 25469.39 crore as against a gross premium of Rs 22,644.84 crore. The general insurance industry had been growing at 24 per cent prior to detariffing.

A senior insurance official said the overall premium reduction in corporate portfolio (fire, marine, group health) by 40-50 per cent had made the business unattractive for insurers.

The retail business (which is motor own damage and third-party insurance, health insurance, home insurance) will be growing at 20 per cent and will become the focus for insurers.