The Insurance Regulatory & Development Authority (Irda) on Monday warned health insurance, motor insurance and other general insurance policies might turn costlier, with the settlement claims going up.
“The demand and supply position in the non-life industry will be such that prices should harden and I expect to see evidence of that in the course of the next few years. It will become even harder as we go along,” Irda Chairman J Harinarayan told reporters at the ‘Ficci National Conference on Insurance’.
The cost of insurance cover for policyholders is expected to rise in the wake of insurance companies setting aside higher funds for claim settlements. The regulator had asked non-life insurance companies to introduce changes in their marketing, pricing and modes of claim settlement in order to become profitable.
“Because of the requirement of a rise in provisioning, there would be a reduction in capacity and because of that, there would be a hardening of prices,” Harinarayan said.
In a bid to enhance the solvency margins of insurers, Irda had proposed to increase the provisioning requirement for motor insurance. It had increased the provisions made for motor pool to 153 per cent of book value for the four years till March 31, 2010, compared with 126 per cent maintained by companies.
Harinarayan said in the next three years, insurance companies would see changes in the distribution set-up, marketing techniques, channels of distribution and the terms of regulatory development. He said the agency model we see right now had deficiencies and that required to be strengthened. “I do not think the agency distribution model is going to last very long,” he said.
Meanwhile, unit-linked insurance plan (Ulip) business declined 15 per cent during 2010-11 — a period that saw a turf war between Irda and market regulator Securities & Exchange Board of India over the regulation of Ulips.
“The proportion of sale of Ulip products has certainly come down. Compared to last year, Ulip business has gone down by about 15 per cent,” Harinarayan said.
On IPO guidelines for life insurers, he said, “They (life insurance companies) would complete 10 years this year. Our IPO guidelines must be in place before that...by the end of this month.”
