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Car insurance premiums poised for sizeable drop

N.S. Vageesh

Insurers gear up for free price regime from January


What's ahead
A reduction of 10-15 pc in car, two-wheeler rates, says National Insurance CMD.
Fire premiums could come down, mediclaim may rise, says ICICI Lombard MD

Chennai , Dec. 5

Motorcar owners and two-wheeler owners can look forward to lower insurance premiums in the next year. Your premium payments can go down by 15 per cent compared to what you had incurred this year.

These cuts can happen when the general insurance industry moves to a free price or de-tariffed regime from January 2007. Motor insurance premium collected by the industry is estimated to touch Rs 10,000 crore in the current fiscal.

In the normal course, a free price regime that gives companies the flexibility to charge premiums that reflect the risks being taken on, after a spell of regulatory suppression, would see rates going up.

But competition among the 13 players in the general insurance industry as well as a cautious approach could see rates remain stable or go down. Till now, companies provided motor insurance according to the tariff laid down by the regulators.

Motorcar premiums

Motorcar premium rates in India are already said to be among the lowest in the world. Compared to the insurance rates of about 7 per cent of sum insured, premium rates here are only about 3 per cent of sum insured.

For instance, a Maruti Alto car costing about Rs 3 lakh would incur an insurance premium of about Rs 10,000 per annum.

With just a little over three weeks to go for a new era to begin, what are the expectations of these companies on how rates will move?

Expectations

Mr V. Ramasaamy, Chairman and Managing Director, National Insurance Company, told Business Line that "We expect an average reduction of 10-15 per cent in car and two-wheeler insurance rates. The loss ratio in these two segments is still favourable. But in the case of commercial vehicles and passenger buses, the ratio is unfavourable and rates need to go up.

However, this would depend on whether the IRDA would allow us to increase rates and load, based on the past claims experience."

While pointing out that it was difficult to make a general statement on the direction of premium rates, Mr Sandeep Bakshi, Managing Director, ICICI Lombard General Insurance Company, said, "We do not expect to see a significant variation in motor and miscellaneous categories in the initial stage.

The fire premiums could come down and the marine and group health premiums could increase but in all the cases, we do not expect any sharp variation and expect it to be in the range of 20 per cent. De-tariffing has always led to the growth of the market opportunity and we look to the future with optimism."

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