The freeing of general insurance premium from the shackles of tariff would be music to the ears of business houses and households alike. General insurers see competition driving down premiums for industrial, engineering, fire, household and health insurance. | |
| The general insurance industry will witness up to 20 per cent drop in premium rates after December 31, 2006. Industrial, engineering, fire, household and health insurance account for about 30 per cent of general insurance companies' total business of over Rs 7,000 crore. |
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| "The premium rates will go down 10 to 20 per cent initially for health and motor risks in order to grab bulk amount of businesses," said Girija Kumar, assistant general manager, New India Assurance. |
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| Motor insurance, which constitutes 40 per cent of general insurance industry, may or may not be freed from tariff regime after December 31, 2006. |
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| Insurance Regulatory and Development Authority will take a final view on motor insurance later, as it involves a large number of customers. Marine hull insurance constitutes the remaining 30 per cent of the general insurance industry's business. |
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| The general insurance industry will witness volatility soon after it is freed from the tariff regime, leading to a dip in premiums for one to two years, an ICICI Lombard General Insurance official said. |
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| V N Bhargava, assistant general manager, Oriental Insurance Company, said, "We expect premium to go down 10 per cent in a few classes of risks, but afterwards premium rates will depend on the risks involved. We faced a similar kind of problem when marine hull got de-tariffed earlier this year." |
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| The overall claims ratio for general insurers ranges from 60 to 70 per cent, while it is over 100 per cent in the case of motor insurance. In insurance business, claims ratio of 70 to 80 per cent is considered comfortable. |
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| "The function of underwriting will be independent of business development functions. We expect the premiums to come down for a while, but it will not create a problem similar to what we faced when the marine hull got de-tariffed," officials from Cholamandalam MS General Insurance Company said. |
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| The announcement of the roadmap for freeing general insurance from the tariff regime has also made the public sector general insurance companies get cracking for creating a database of risks underwritten, and claims received and settled. |
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