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Sunday, April 17, 2011

S&P downgrades Indian General Insurance outlook to negative

S&P, the global ratings agency, has downgraded the business outlook of India's general insurance companies from stable to negative. This is primarily because they believe that there will be significant downward pressure on the insurance companies' bottomline due to underwriting losses. Put simply, they feel that higher claims will affect profitability of the Indian general insurance companies. BCG, in a recent report, has mentioned that the accumulated underwriting losses of the Indian general insurance companies is in excess of Rs 30,000 crores. S&P, in their report, mentioned that the insurance companies were reporting profitability primarily because of investment income, which they believe is currently volatile and there can be some shocks  there.

This is not surprising- general insurance companies are bleeding because of the 3rd party motor insurance where there is a collective deficit in excess of Rs 5000 crores, and health claims where hospitals are massively exploiting the insurers by overcharging. The Indian customer will need to brace himself for increased premium rates very soon.

3 comments:

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