Business-starved non-life insurers are doing business for almost nothing at all. Public and private sector non-life insurance companies are offering irrational discounts to grab dwindling customers in a slowing economy.
“Since the overall economy is not growing, there is a cut-throat competition for whatever business is coming up,” said TA Ramalingum, head of underwriting at Bajaj Allianz General Insurance Company. A housing complex in Gurgaon, adjoining Delhi, was recently offered a . 500-crore insurance cover at a premium discount of 99.75%. Fire and engineering insurance contributes . 10,000 crore to the . 70,000-crore non-life industry. Growth of the non-life industry depends on industrial growth, vehicle sales and health covers. The industry is looking at a growth rate of just 10-12% in the current fiscal against the 19% growth it achieved in 2012-13.
“Companies have split fire insurance into flexa (fire, lightening, explosion and aircraft) and catastrophe risk, and they are offering ridiculous discounts on flexa rate,” said KG Krishnamoorthy Rao, managing director and CEO at Future Generali General Insurance.
Low loss ratio, or the percentage of premium earned to claims paid, fell to 60% in the absence of natural calamities last year. “Last year, we did not have large claims. This helped companies in undercutting,” said Ramalingum. But with floods in Uttarakhand and Kerala this year, the industry is staring at estimated claims worth . 2,000 crore.
“Some insurers are offering policies at near 100% discount due to competition,” said a non-life insurance company executive. “This year is going to be a mayhem in pricing.”
Sources – The Economic Times
Date – 20-8-2013
Writer – SHILPY SINHA MUMBAI