A non-life boost for PSU insurers

MUMBAI: Public sector non-life insurers will gain significantly following detariffing in January ’07 compared to private peers. PSU firms have a disproportionately high share of third-party insurance — a segment where premiums are expected to rise after free pricing is introduced. As against a 65% overall marketshare, PSUs have an 84% marketshare of the motor third-party insurance business. Non-life companies generated a total premium of Rs 6,629 crore in the first quarter of the current fiscal.

PSU insurers had a 65% share of the gross premium mobilised. As against this, the total motor third-party insurance premium mobilised in the first quarter was Rs 630.68 crore, of which the contribution of state-owned firms at Rs 535.5 crore was 85%. The motor comprehensive insurance premium for the industry in the first quarter amounted to Rs 1760 crore, but here, the share of the public sector was only 64%.

While private non-life firms have stayed off motor insurance, they have been aggressive in health insurance. The total health insurance premium generated by the non-life industry amounted to Rs 788 crore in the first quarter.

The premium generated by state-owned companies amounted to Rs 506 crore, which is 65% of the total premium. The high share of the private sector is largely because of ICICI Lombard, which emerged as the second largest health insurer in the country. It has recorded a health insurance premium of Rs 172 crore in the first quarter, an increase of 218% over Rs 54 crore in the corresponding quarter last year.

Premiums in profit-making businessess such as fire insurance, motor own-damage and other profit-making engineering business are expected to come down following free pricing.

But rates for loss-making motor third-party insurance is expected to rise, as insurers will no longer be restrained by tariffs. Insurance rates for some classes of business such as group health insurance and marine cargo insurance is also expected to rise though there are no price restrictions on these businesses.

So far, rates of marine cargo and group health insurance have been kept low by insurers to lure customers to place profitable fire business. Since insurers can offer discounts on these businesses directly, there will be no need to offer cross-subsidies.