The Hindu Business Line : Non-life insurance in fast lane

The non-life insurance industry saw some revolutionary changes this year with the free-price regime being ushered in on January 1. Earlier, fire, engineering and motor insurance portfolios were under tariff or an administered rate system.

Analysts had predicted a `blood bath' and said insurers would slash their premium rates as competition would drive the market. As expected, premia on fire and engineering have dropped by 25-40 per cent. While motor insurance policies covering own damage have benefited from a 20 per cent discount, there has been an increase in rates on third party insurance of vehicles. But what is surprising is that despite the discounts, the non-life market has registered growth in January.

According to IRDA data, the gross premium underwritten by non-life insurers in January has registered a growth of 25.7 per cent to Rs 2,202 crore against Rs 1,751 crore in the previous year

During the first 10 months of the fiscal, the premium jumped 23 per cent from Rs 17,530 crore to Rs 20,378 crore.

Experts, however, say renewals of the fire insurance policies of major corporates are yet to happen and an accurate assessment has to wait till March-end.

Insurers say the free-price regime has led to a reduction in cross-subsidisation between tariffed and profitable portfolios like fire and non-tariffed lines like health insurance. With the drop in premium, customers are opting for larger covers with the drop in premium.

The hike in the third party premium on motor insurance has partially helped insurance companies correct their losses.