The shares of many general insurance companies are in focus after the government plans to raise the third-party motor insurance by 10 percent. In this article, we will discuss this topic further.
According to sources, the Ministry of Road Transport and Highways, along with the Insurance Regulatory and Development Authority of India (IRDAI), is planning to propose a 10 percent average hike in the premiums of third-party motor insurance plans.
Insurers have previously reached the government to increase the premiums by 5-15 percent, citing mounting pressure from court awards, more claim payments and a distorted claims cycle during the pandemic years.
A senior industry executive also said that a substantial hike in premiums is needed, as on an accident-year basis, the motor third-party segment bears more losses.
Also, the hikes for categories like commercial vehicles, loss-heavy segments could see a sharper rise in premiums. However, for categories like school buses, the premiums may not rise much.
Go Digit General Insurance, a prominent player in this industry, gains around 35 percent of its revenue from its Motor Third Party insurance. On the other hand, ICICI Lombard derives 20 percent of its revenue from the third-party segment.
Companies like General Insurance Corporation of India, New India Assurance Company, etc, will also benefit from this as they derive a significant portion from Motor Insurance as well
This change has turned attention back to general insurance companies, as companies earn a significant percentage of their revenue via third-party motor insurance premiums. A 10% increase would allow them to have a more substantial buffer for future unexpected events and improve the capacity for future shocks.
Written by Satyajeet Mukherjee
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