Insurers in segments other than life insurance are all set to increase their premium rates by 10% to 15% in some of the segments to protect their income margins.
The decision comes in face of sustained losses emerging from settlements of large insurance claims and falling interest rates that can crimp the bottom line of the insurers. Most insurers feel that the premium rates for some loss-making portfolios have fallen much below the required rates. Hence, the rates will have to be readjusted to maintain a balance.
Insurance regulator IRDAI also hinted at a hike in premiums for third-party motor insurance and group health insurance. In all likelihood, the hike will be applicable from April 1 when most of the renewals take place in the general insurance market in India.
In a conversation with PTI, P J Joseph, an IRDAI member for Non-Life Insurance sectors, said that since insurance pricing has already reached its lowest possible, it is not surprising for the premia to go up now.
He added that non-life insurers are eyeing floor price of over 10 segments, including cement, pharma and power, and group health insurance, where they may increase the premia in the near future. The premia hike may range from 10% to 15% in these segments from the next financial year of 2017-18.
National Insurance Chairman and Managing Director Sanath Kumar opined that the insurance market is too competitive for premium hikes to be very high. He said that they are working closely with GIC Re to increase the premiums of more than 10 large portfolios which are currently facing losses.
Chairman and Managing Director G Srinivasan declared that premium hike at New India Assurance may occur for segments such as group health and fire insurance in the new financial year.
New India, the country’s largest non-life insurance company, is also set to increase its premium for certain segments.
SBI General, a non-life insurance institution in the private sector, is working on a three-pronged strategy – better expense control, better efficiency and better selection. SBI General Managing Director and Chief Executive Pushan Mahapatra stated that the current challenge is to maintain profitability when investment yields are coming down.
By the end of December, 2016, SBI General had an investment income of Rs.251 crore, an increase of Rs.59 crore from the previous year’s income of Rs.192 crore. But with falling interest rates, the company is not sure whether it can protect its bottom line.
However, Bajaj Allianz General Insurance MD and CEO, Tapan Singhel didn’t declare any plans for a premium hike.
He said that Bajaj Allianz has a business model that always looks towards sustainable pricing. The underwritten portfolios and policies at Bajaj Allianz have always been made available at a price equivalent to the risk. The company has never contested on pricing and will continue with prudent underwriting, risk-based pricing and efficient servicing of claims.