Insurers Reducing Motor Portfolio

With competition heating up, state insurers are waking up to the need to be more prudent when writing motor business.

And after their spate of writing motor business for new cars last year, private insurance companies too are relooking at the skewed model.

Many have decided to check their exposure in the motor risk business, in an effort to reduce losses.

ICICI Lombard General Insurance Company is bringing down its motor insurance portfolio from 35-40 per cent to 15 per cent. "We are re-configuring our portfolio mix and bringing down our exposure from 35-40 per cent to 15 per cent," said ICICI Lombard General Insurance Company managing director & CEO Sandeep Bakhshi.

Bajaj Allianz General Insurance Company has decided to cap its exposure to motor risks from 65-70 per cent of its total portfolio to around 40-45 per cent. This is despite its success in maintaining the lowest motor claims ratio in the industry at around 90 per cent.

The primary reason behind a high claim ratio has been the need for new players to tie up with dealership outfits, which generally sell new cars. Bakshi said: "Going forward, we could decide to confine ourselves to specific garages." At the same, as a vehicle is constantly on the move, this change in strategy could affect customer service. "The idea is to give the right service, but at the right price," he added.

Covering new cars has meant writing claims, said a senior official at a new private company. A scratch or replacement of a broken rear mirror spells sizeable claims, anywhere in the region of Rs 800 to Rs 20,000! Introduction of a cashless claim settlement system may have added sizeable customers for a new company. But at the same time, companies have seen claims mount.

Altering business strategy is not limited to new players. Old state-owned insurance companies have also decided to change tracks. "We are more concerned with the bottom line and not just the top line, as our motto is to make profit in underwriting," said The New India Assurance chairman-cum-managing director Rajendra Beri. The state insurer has become more cautious in underwriting in all lines of businesses, including motor, he added.

"Basically it is how I see the risk, and whether I can accept it or not," stated Beri.

At the same time, motor plays a significant role, and no insurance company can afford to be left out, said ICICI Lombard chief. Motor insurance is the fastest growing portfolio in the country, as India's vehicle population has crossed the 5.5 crore mark, with 2.5 crore vehicles added every year. It accounts for the largest chunk of business in the general insurance sector, as much as 38 to 40 per cent of the entire general insurance premium.