Motor insurance sector faces a major crisis

Applications for third-party insurance policies are not encouraged and more often passed to the competitor. And last but not least, the insurance companies have decided not to accept renewals of the motor policies issued by a different company.

Curiously, the hard approach for the motor insurance sector by companies comes despite the freedom given to the general insurance companies to hike the motor insurance premiums as high as 218 per cent from last month.

Kerala, where road accidents are six times the national average, is eligible for maximum hike in premiums. Here, too, anomaly exists as there are no hard-and-fast rules, which means the premiums can be fixed lower if the insurance company desires so.

"The recent hike is hardly sufficient as the motor insurance sector brings a loss to the tune of over 350 per cent for the insurance companies," says Kerala State General Insurance Employees Union president K G Prabhakaran.

Industry officials say prior to the opening up of the insurance sector, the public sector general insurance companies were making up for the loss in the motor insurance sector by the lucrative fire insurance portfolio.

"The new entrants have almost taken away the highly-profitable fire insurance segment, whereas the loss-making motor insurance segment, including the third party insurance segment, was left for the public sector insurance companies to handle," says United India Insurance Officers Association general secretary V R Ramachandran.

Also, the tariff advisory committee (TAC) had lowered the fire insurance premium by 40 per cent, even while hiking the premiums on the motor insurance sector. "Earlier, we were making up for the losses in the motor segment by the profits from the fire sector. But, not any longer," say officials.

Sources say TAC has yielded to the pressure by the powerful truck lobby while revising the tariffs recently. The premiums on trucks were only marginally hiked by 10-14 per cent, even while the tariffs on small segments, such as autorickshaws and passenger cars, were increased by over 60 per cent. The arbitrary hike in premiums has not been taken lightly by the affected parties.

Oriental Insurance Companys Kondungalloor office was forced to shut down for a day last month after motor insurance vehicles association representatives threatened to damage the office due to the arbitrary hike in premiums.

In another incident that took place at a branch office of New India Assurance in Ernakulam, a policyholder threatened to harm its officers when he was told to pay a highly-increased premium last month. "Discontent is brewing among the clients. We are aware of similar instances in other offices in the state as well," says Prabhakaran.