May put in place a pool if transporters' lobby objects to rise

Our Bureau

Significant share

Motor portfolio

accounts for 45 per cent of the Rs 21,000-crore general insurance premium pie.

The claims

ratio in this segment is above 200 per cent.

Mumbai, Aug. 29

General insurance companies are negotiating a rise in premium with transporters' associations, once the free-price regime kicks off from January 1, 2007.

Mr B. Chakrabarti, Chairman and Managing Director, New India Assurance, said that insurance companies had held meetings with the transporters associations and were discussing the rise in premium.

"We will have another meeting by mid - September. If a price rise is not acceptable, then the insurers are considering a motor pool for the commercial segment," said Mr Chakrabarti.

The IRDA had studied the balance sheets of the general insurance companies and agreed that there was a need to hike motor insurance premium for commercial vehicles, he said.

Motor portfolio accounts for around 45 per cent of the Rs 21,000-crore general insurance premium pie. But companies have seen a significant drop in their underwriting profit due to losses from this segment.

The claims ratio in this segment is above 200 per cent.

"Public sector insurance companies currently cover around 90 per cent of the commercial vehicles. There is a fear that in the free-price regime, commercial vehicles may be refused insurance if the premium is not commensurate with the loss experience," said Mr Chakrabarti.

Commercial segment

Insurance analysts say that the commercial segment could see a rise of around 25 per cent in premium in the detariffed scenario.

If the transporters' lobby does not accept the price rise, then insurers are likely to put in place a motor pool. "This means claims for commercial vehicles will be paid through the premium pool. The exposure of insurance companies to the pool would depend on their gross domestic premium," he said.

The motor insurance pool would be managed by General Insurance Corporation of India.

On the issue of free-price, Mr Chakrabarti said detariffing was a challenge and an opportunity.

"Price changes will now be determined segment-wise and client-wise and the cross-subsidisation between portfolios will now be done away with. We are in the process of capturing market data to arrive at the right price," he said.

(This article was published in the Business Line print edition dated August 30, 2006)
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