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Tuesday, April 12, 2011

General Insurance Premiums to cost more

IRDA Chairman, J Harinarayan, has mentioned that premium rates for Motor Insurance, Health Insurance and other General Insurance products would see an increase very soon.

This is primarily driven by the fact that claims ratios of the GI companies have been higher than expected, and the insurance companies have needed to increase their provisioning. The key factor that has contributed to this higher provisioning is motor third party claims, where the premiums are ridiculously low. General Insurance companies have incurred a combined loss of Rs 3500 , primarily on account of motor claims.The third party motor insurance, which is a mandatory product, could see an increase by as much is 300-400%.

Because of higher provisioning, insurance companies might have lower capacity and that might lead to increased rates. However, the rise in rates is likely to be gradual instead of a steep one time hike.

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