 "Motor Insurance")
If third party (TP) motor rate is not hiked, it will become a survival issue for companies, and thus, there is need for a relook, said Girija Subramanian, chairman and managing director (CMD) of New India Assurance Company, during an analyst call after the earnings were out this week.
“As far as (motor) TP is concerned, it is a mandated business. So, we have no control over it. We will have to continue doing the TP business. We cannot have a strategy around it. The only thing we can do to reduce the overall impact is to align our own damage strategy in a way that the entire own damage plus TP becomes sustainable… The TP premium hike is surely the need of the hour and it will become a survival issue for most companies if it is not re-looked into,” Subramanian said.
The motor TP rates have not been revised for a few years now. The non-life insurance industry is hopeful that this year there will be some upward revision in rates.
Recently, industry executives met the department of financial services (DFS) secretary and discussed the issue with him.
Motor TP rates are set by the Ministry of Road Transport and Highways (MoRTH) in consultation with the Insurance Regulatory & Development Authority of India (Irdai).
The motor TP business, which accounts for 15 per cent of New India’s overall product mix, grew 11 per cent year-on-year (Y-o-Y) to ₹6,652 crore in FY25. ALSO READ: Auxano Capital eyes final close of two funds, 3-4 exits by year-end
However, the incurred claim ratio (ICR) in the segment increased to 108.2 per cent against 96.4 per cent in the year-ago period.
Since the business is mandatory, the insurer will continue to align its motor own damage segment – accounting for 13 per cent of the product mix — in a way that the entire motor business remains sustainable.
The company is targeting original equipment manufacturers (OEMs) in the own damage segment with more focus on private car business. This is to shift it from commercial vehicles as the ICR is better in the former.
New India Assurance’s ICR in the health segment reduced to 100.9 per cent from 105.9 per cent. This was on the back of improvement in the retail segment combined with a slight moderation in medical inflation to 12 per cent from 14 per cent.
The company has also hired a new set of medical officers to increase the speed of audits in FY25.
The overall combined ratio was down to 117 per cent from 120 per cent in the previous financial year (FY24). This hints at an improvement in profitability on the back of initiatives taken on risk selection in both group and retail businesses. It has also shed over 900 accounts to maintain its profitability.
The general insurer has also declared FY26 as a micro, small and medium enterprise (MSME) year to focus on retail business with emphasis on profitability.
