Industry officials said each insurer would try to capture a greater market share through better risk-based pricing and customer segmentation.
KOLKATA: While premium rates on a few classes of insurance such as fire and engineering are falling, an increase in charges for marine, health insurance and even some liability products is expected over the next few months.
Industry officials said each insurer would try to capture a greater market share through better risk-based pricing and customer segmentation. Industry estimates suggest that a significant price war may last for 18-36 months.
A nationalised insurer said risk-based pricing would lead to rationalisation of premium structures. “A strong solvency is required and hence underwriting efficiency will increase”, an industry official said.
“Prices are already hardening on some classes of insurance and companies are becoming cautious to underwrite risks. While imposing stiff excesses, they are also refusing risks. Indications on higher premiums for marine are already evident. The ratings will be done much more scientifically”, Rahul Agarwal, CEO, Optima Risk Management Services, said.
Following detariff of marine hull a few years back, strong competition lead to an almost 50% drop in rates. Insurers predict marine hull insurance rates will return to their earlier levels. According to insurers, factors like claims history, the age of the vessel and maintenance standards will influence premium rates.
It is estimated that premiums for older ships could rise by almost 40% on renewals, while those on shipping fleets in a better condition may rise by 10-20%.
Premiums on health insurance have already gone up, with each nationalised company restructuring its mediclaim business. The higher age bracket has witnessed the highest increase.
As most nationalised firms have to bear a high claim ratio of over 100% on corporate mediclaims, rates for this category are rising. The challenge has been even more intense with the private sector getting into health insurance.
The price of health insurance is rising as insurers are doing away with the element of cross subsidies. It would not be prudent of them to write corporate mediclaims at a lower rate when premiums on mainline risks have been falling, Agarwal said.
Liability insurance is still low in India, when compared internationally, and a few private players are the strongest players. While it is early to say whether rates on these would increase over the next few months, any reckless quoting by public sector companies on liability insurance has definitely stopped, said sources and the last two months has seen some hardening of rates.
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