NEWS & ADVICE : AUTO INSURANCE
Finance Minsitry advises a common underwriting manual for GICs
By Neelima Shankar
Aug 21, 2012
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State owned general insurance companies (GIC) have been advised by finance ministry to devise a common underwriting manual to reduce the risk in the auto insurance segment. The move is directed to curb the impending losses in the motor insurance segment.

This would prevent the risk from getting transferred from one government insurer to another, and also make the four GICs following same underwriting practice.

The four PSU insureres National Insurance, New India Assurance, Oriental Insurance and United India Insurance hold nearly 55% of the general insurance market, with a collective market of Rs. 58,000 crore. Finance Ministry has asked the insurers to stop paying commissions/brokerages on vehicles older than 10 years old and restricting it to 5% of own damage premium for vehicles older than 7 years.

Motor portfolio accounts for a large chunk of premiums collected , but has always been prone to loss making due to higher third party claims. The claims ratio for the segment is nearly 153%, which the ministry hopes to get down to 100%.

During the last fiscal these companies collected Rs. 24,000 crore in motor premiums, while the third party claims accounted for losses worth Rs. 8,000 crore for the industry.


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