The hike in motor third party premium rates may not be adequate, feel general insurers.
The Insurance Regulatory and Development Authority has increased the premium by up to 20 per cent with effect from April 1. This was the second consecutive annual hike after a gap of four years.
“The loss ratio in this segment is very high and any hike less than 40-45 per cent is not adequate,” Mr Gaurav Garg, Chief Executive Officer, Tata AIG General Insurance Company, told
Total motor premium during 2010-11 was at Rs 16,879 crore, while the expected ultimate loss is Rs 17,432 crore.
As per IRDA estimates, the loss in the third party pool ranges from 180 per cent to 270 per cent.
The rate hike this year assumes significance in view of the new ‘declined risk pool' for mandatory third party cover which will be functional from April 1, 2012.
According to Mr Sanjay Datta, Vice-President, ICICI Lombard General Insurance Company, it is “difficult” to say whether the hike is adequate or not.
“There is a formula to calculate hike as per IRDA's circular last year. So, many factors have been taken into consideration,” he said.
In view of the new mechanism for third party motor segment, the hike was in “right direction”, he added.