Get ready to shell out more for motor, health & fire insurance
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You may soon have to shell out more to buy motor, health or fire insurance. Concerned over the high level of losses in general insurance and pressured by a government direction to move further towards market-linked pricing, insurers are planning to raise premiums by an initial 2-5% and further up gradually, sources said. Some of the hike will be inflation-linked, but a major portion will be due to the new pricing strategies adopted by insurers after assessing risks.
In recent meetings with insurance industry representatives, the finance ministry cited mounting losses, asking state-run insurers (including Oriental Insurance, United India Insurance, New India Assurance and National Insurance who together command 58% of the R53,000 crore non-life business) to consider revamping premiums, sources told FE. The ministry said instead of cutting prices to beat competition, premiums should take into account the companies' expenses, ability to pay claims, risk assessment and incurred losses.
"The market should harden soon. Initially, one can expect a 2-5% hike across classes. Prices will depend on each company's losses," said an official from leading PSU non-life insurer. The official said companies are reviewing their premium prices by analysing their losses, cash flow, management expenses, risk assessment and costs of acquiring business.
A top official of a private sector insurer explained that insurers are increasingly considering acquiring only clients adopting best practices — such as plants with proper protection against break out of fire. Insurers in the motor segment are also doing a region-wise study across India on incidents of accidents and vehicle thefts to better price their premiums.
The General Insurance Council, the representative body of the non-life insurance sector, is also seized of the matter. "Premium prices will go up shortly. Companies have understood that prices can't go down any further due to the mounting losses. Definitely there is a concern and every company is tightening its operations to reduce losses," a council official said requesting not to be named. The official said the timing of the price hike and the percentage of increase depends on each company.
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