Motor insurance losses for general insurers in India could exceed 230% in 2018-2019, up from the current level of 140%.
The huge increase in losses is mostly due to the fact that the recent hike in third-party motor premiums wasn’t as high as the industry had hoped for, Forbes India reported.
Furthermore, the Ministry of Road Transport and Highways has issued a rule requiring insurance companies to pay out a minimum of INR500,000 (US$7,400) to road accident victims claiming third-party insurance. The move, which had the increasing cost of living in mind, resulted in a ten-fold increase from the previous minimum of INR50,000.
“Motor premiums only went up by 10% to 15% this year on an average, as against a demand of 30% to 40%,” a head of claims at a mid-size insurer told Moneycontrol. “We are facing high claim ratios in third-party motor and the situation is set to worsen after the [INR500,000] mandatory third party claim.”
According to the report, India’s motor insurance industry could take a hit of up to INR150 billion (US$2.22 billion) or even higher once the compensation amount goes up in January 2019.
The Indian government said that third-party insurance claims will increase annually by 5%, further compounding the woes of insurance companies. There is no cap on the maximum insurance compensation that the family of a road accident victim can claim.
Insurers have long sought a cap on the compensation they need to pay out in case of a road accident-involved death.
“If there is a 5% increase every year, the insurance regulator should also make provisions for individuals to pay a higher premium since claims have been on the rise every year,” said the chief financial officer of a state-owned general insurer.
India court sides with deceased’s family in road accident case
Transport minister slams insurers: focus on road safety instead of premiums
India authorities seek to stop unauthorised motor insurance sales