Plans

For the Rs.42,000 crore, Indian general insurance industry which has taken a hit of Rs.10,000 crore in 2010-11, the path to profitability now appears to be a tough one.

G Srinivasan, chairman and managing director, United India Insurance, commented that the challenges for both the industry and individual insurance companies are enormous.

Over the years, the general insurance industry may be making underwriting losses but the companies have huge investment income by which they have been able to cover up those losses and have been able to show reasonably sound balance sheet over the years, Srinivasan had said at an event in Mumbai.

“The situation will no longer continue because the quantum of losses are increasing. In 2009-10, the general insurance industry had made an underwriting loss of Rs.5,900 crore, whereas in 2010-11 the estimates is that the industry would cross Rs.10,000 crone underwriting losses. The general industry may have to record net losses in 2010-11,’’ he said.

Hemant Kaul, managing director and CEO, Bajaj Allianz General Insurance, said that the year 2011-12 will be challenging year for the general insurance industry.

“Motor insurance which accounts for more than 40% of the industry would be affected due to high interest rate and high fuel prices. High interest rate is also slowing down project implementation, so this year will be really challenging. Though last year the industry managed to grow by over 20%, this year maintaining 15% growth will be a challenge. The bigger challenge, however, will be profitability,” cautioned Kaul.

Bhargav Dasgupta, managing director and CEO, ICICI Lombard General Insurance, explained that the recent increase in premium rates for commercial vehicles on motor third party (with effective from April 25, 2011) is a very positive measure for the industry. “It narrows down the losses suffered by all the players in the industry prior to the revision in premium rates. However, there may be a need for further price corrections to break even,” he said.

Gaurav Garg, managing director and CEO, Tata AIG General Insurance, said that in 2010-11 , the revised reserving of the third party motor pool for the past three years has have wiped away the profits for the entire industry as the hit taken by the industry was a significant amount of Rs.3,500 crore.

“From an actuarial standpoint, we understand that the recent hike in third party motor premiums may still not be sufficient to offset the motor pool losses,” added Garg.