Loss of Rs 3500 crore to insurers

March 11th, 2011 by James

Loss of Rs 3500 crore to insurersMinister of State for Finance Namo Narain Meena said in a written reply to the Lok Sabha disclosed that insurance companies would incur losses of about Rs 3,500 crore in the current fiscal because of motor insurance.

Meena said, “The insurance companies would incur a loss of approximately Rs 2,500-3,500 crore in the current year (2010-11) on account of this (motor insurance) business of which a substantial portion will be borne by the public sector insurance companies.”

From in.finance.yahoo.com:

“If the situation was allowed to continue, there will be a severe dent on the solvency of insurance companies which could lead to both solvency and liquidity issues for these companies,” Meena added.

In January, the Insurance Regulatory and Development Authority (IRDA) had, in an exposure draft, proposed a review of motor insurance premium rates for third party liability cover.

If the draft is implemented, it would result in a 10 per cent increase in premium for private cars and two wheelers and up to 80 per cent for goods carriers.

“The exposure draft envisages an increase of 10-80 per cent in the premium rates of third party motor insurance,” he said.

Third party motor insurance is mandatory for all classes of vehicles. Though regulation of the tariffs in the non-life sector was withdrawn in 2007, third party motor insurance continues to be regulated.

Meena added that the insurance regulator has been asked to implement the proposed increase in motor insurance premium as the losses could adversely affect the companies.

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