State-owned general insurers risk losing a major part of motor insurance business to private sector peers due to lack of innovation in their products. As the existing produc?ts are not sufficient to compete with the private insurers, public sector general ins?urance firms have been fo?u?nd wanting in preparing ‘comprehensive' products.
As of now, the public sector insurers are offering a 3-year third party car insurance policy with only one-year own damage cover, which in the industry’s parlance is known as a bundled product. While private firms have both bundled as well as comprehensive products in which they offer customers the 3-year third party car insurance cover as well as own damage cover.
Said a head of public sector general insurer, “As state-owned general insurance firms are not able to come up with comprehensive product, policyholders could sta?rt shifting to private players.” “The PSU insurers want to gain some experience before coming up with a comprehensive product,” he said.
At present, all PSU general insurers have three-year third party and one-year own damage insurance covers for cars and 5-year third party and one-year own damage for two-wheelers as part of bundled product. Private pl?ayers offer both 5-year and 3-year insurance covers for consumers, respectively, as part of comprehensive product. However, the state-owned firms feel that insurance regulator needs to co?me up with a rule favouring this move. It will mean allowing policyholders to buy third party cover from a company and own damage from another in future.
Irdai chairman SC Khu?ntia said, “The regulator is aware of this development and it is yet to come up with a regulation towards this.”
According to industry estimates, own damage cover is comprises half of the Rs 60,000 crore motor insurance business.
For United India Insurance, the size of the motor insurance business currently is Rs 5,500 crore and the company plans to make it to Rs 6,300 crore by the end of FY19. But it has no plan to launch comprehensive mot?or insurance product as of now. Same is the case with other 3 general insurers.
According to a top official of a PSU general insurer, it is about adequacy of premium and not loading of profitability. “Long-term policy revenue is to be accounted over the term of the policy, and hence it may not help add our revenue. Again profita?bility in motor insurance, third party long-term policy is always a matter of making provisions for technical liability, which is an actuarial-based estimate,” he said.
Shriram General Insurance managing director Neeraj Prakash, said, “motor insurance cover contributes aro?und 97 per cent of our total premium and our premium is growing by 10-15 per cent every year.”