India: Motoring premiums to shoot up by 40%

Third party motor insurance premium rates are likely to soar by at least 40 percent as the insurance regulator has raised the quantum of funds which non- life insurers have to set aside to meet high claims in this industry.

In a notice to general insurers, the Insurance Regulatory and Development Authority (IRDA) increased the provisioning to 210 percent of claims from 140 percent. The increase is because of the claims ratio exceeding 150 percent in the motor business, according to sources. According to KG Krishnamoorthy Rao, managing director and chief executive officer of Future Generali India Insurance, the general insurance industry would have to provide around INR4.5 billion (USD72 million) in additional capital.

R Chandrasekaran, secretary of the General Insurance Council, which represents non-life insurers, says that the steep increase in provisioning is a clear indication that premium rates, which are set by IRDA, are inadequate at current levels.

Insurers say that the increases in claims have not been matched by a hike in premiums.