Motor insurance combined ratios might rise in FY17

In FY17, MTP premiums went up by increase of 10-40% from April 1 in private cars and two-wheeler segment

The combined ratios of general insurance companies in the motor insurance segment might see an improvement in the current financial year (FY17).

Motor third-party premiums went up 10-40 per cent from April 1 this year in the private cars and two-wheeler segments. According to insurers, given the heavy losses in the motor segment, this rate hike was proportionally higher than that of previous years.

While rates rose 40 per cent for all private cars with engine capacity under 1,500cc, it went up by 25 per cent for cars with a higher engine capacity.

The Insurance Regulatory and Development Authority of India (Irdai) said the cost inflation index had increased by 5.57 per cent year-on-year from 1,024 in FY15 to 1,081 in FY16. However, the regulator cautioned insurers against denying or refusing to provide third-party covers for any vehicle.

For two-wheelers, there would be a rise of 10-15 per cent for vehicles up to 150cc, with a 25 per cent hike for two-vehicles with engine capacity of 150-350 cc.

Third-party motor premium is revised yearly, based on inflation and claims. While third-party insurance is mandatory, own damage insurance is optional for individuals.

Overall, the net incurred claims of non-life insurers stood at Rs 55,232 crore in 2014-15, against Rs 49,179 crore in 2013-14. The incurred claims exhibited an increase of 12.31 per cent in FY15. Among the various segments, health insurance and motor insurance had a high claims ratio at 96.93 per cent and 77.14 per cent, respectively.

The Declined Risk Pool for Commercial Vehicles - which was in operation from April 1, 2012 - has been dismantled with effect from April 1, 2016. According to industry sources, this will lead to an improvement in the quality of motor business.

At present, motor insurance is the largest non-life insurance segment in terms of business. In the last financial year, it reported 10.5 per cent growth. However, losses with respect to claims have been high.

Overall, the net incurred claims of the non-life insurers stood at Rs 55,232 crore in 2014-15 against Rs 49,179 crore in 2013-14. The incurred claims exhibited an increase of 12.31 per cent during 2014-15.

Among the various segments, health insurance and motor insurance had a high claims ratio at 96.93% and 77.14% respectively. In the motor insurance space, while premiums have seen a growth, rewards from the compensation from third party incidents have seen a 20-30% growth.