Finance ministry has asked four PSU General Insurers, New India Assurance, Oriental Insurance, United India Insurance and National Insurance to do away with massive discounts on fire and property insurance policies to grab market share. This means premium rates for fire and property insurance is set to rise.
Finance ministry has asked four PSU General Insurers to segregate fire insurance portfolio under four parts i.e. Rs 100 crores, Rs 100-500 crores, Rs 500-1,000 crores and above Rs 1,000 crores. Finance ministry has also asked PSU General Insurers to raise premiums.
These insurers offers huge discounts on big-ticket fire and property insurance policies to big companies like Oil and Natural Gas Corporation (ONGC), Air India, Reliance Industries, Jet Airways (India); Institutions such as Board of Control of Cricket in India (BCCI) and High-profile individuals and celebrities.
High-value or big-ticket insurance policies are those policies where sum assured is more than Rs 25 crores.
Insurance companies are offering 100% discount on standard fire insurance policy by not charging any premium on basic policy but only for add-on covers. Taking advantage of this practice corporate accountholders has been able to get windfall discounts.
Finance ministry has asked PSU General Insurers, average premium per policy in different sum insured brands should be enhanced in such a manner that combined ratio does not exceed 100% and total premium collection increases by 20% under each brand of sum insured.
As insurers are required to maintain combined ratio below 100% the premiums will raise by 30-50% across various categories. The impact will be higher on big-ticket policies.
Finance ministry has also advised PSU General Insurers to coordinate among themselves with regards to growth, profitability and procuration of fire insurance business and discourage unhealthy competition of pricing or otherwise.
ONGC, which is the holder of biggest insurance policy in the country, has been paying merely the same premium over the last few years despite considerable rise in its asset size. This year ONGC renewed its policy by paying over Rs 125 crores to cover its assets, last year it paid nearly same premium, though its assets have increased.
Similarly, premiums of Air India’s annual insurance policy, increased marginally to around Rs 160 crores, though its fleet size remained same.
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