The general insurance industry today termed the decision of the sectoral regulator to increase the motor insurance premium as a step in right direction, but too low to cover losses in this segment.
"If you see the exposure draft, there was a proposal to increase premium at a higher rate. Even if done at the proposed level, it was inadequate. So, the current rise is too inadequate to cover the losses in this space on the back of rising accidents and claims," General Insurance Council Secretary General R Chandrasekaran told PTI.
He also said things would not be much different as far as underwriting losses are concerned in the next financial year despite the rise in the premium.
The insurance regulator, IRDA has increased the motor premium rates by an average of 20 per cent effective next April 1. However, these rates are way below the hike proposed in the exposure draft floated in February.
Chandrasekaran, however, said the council would continue its representation to both the regulator as well as the government for increase of premium in this segment. Bharti Axa General Insurance too said the hike is a step in the right direction.
"The increased rates are a step in the right direction from the point of view of the insurance industry as this is a loss-making proposition currently....However, de-tariffing motor third-party premium would help the customers more as in this case good customers would enjoy lower premium as opposed to the current scenario wherein good customers are subsidising the bad customers," Bharti Axa General Insurance MD and CEO Amarnath Ananthanarayanan said.
Another official from a large public sector GI said the company would soon pass on the new premium rates to the customers.
"Whatever the rise that will be passed on to consumers. There is no case for absorbing any part of the rise as this is a loss-making segment," the official said who wished to remain unidentified.
Many of the general insurance industry players are making losses due to high underwriting losses in the motor insurance segment as premium paid are inadequate in comparison to the claims.