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Home / General / Articles

Insurers feel the detariffing pinch

Cut-throat Competition Halves General Segment’s Premium Income Growth Rate.

Cut-throat competition among all players after the general insurance industry was partially detariffed last year has halved the segment’s premium income growth rate to 12% in the period April-December 2007 against a 24% growth achieved during April-December 2006.

Data released by the Insurance Regulatory & Development Authority (IRDA) suggest that collective growth rate of the four public sector players declined from 9% in the previous period to 4% during April-December 2007.

They, however, managed to slow down their loss of market-share. In the period April-December 2006, New India Assurance, United India Insurance, Oriental Insurance and National Insurance collectively lost 8% market-share to the private players. However, during April-December 2007, they lost only about 5% market-share to their private counterparts.

The private insurers, on the other hand, saw their premium income growth rate decline from 63% during April-December 2006 to 27% in April-December 2007 — a large 36% drop.

The first round of detariffing, when the industry was partially unshackled of tariff controls, saw rates dipping by as much as 50% in the large category of products, especially the engineering and fire categories. This time round, IRDA has entirely detariffed the industry from January 1 and there was an apprehension that rates will once again see huge dips. “Although there are aberrations here and there, where rate have been discounted to a large extent, the industry as a whole is not likely to see rate cuts to the extent that were witnessed in the previous round. Insurers feel this time rates may decline at most by another 15-20% across all categories,” said an official from the General Insurance Council. The council is the representative body of non-life insurers.