With the exception of Oriental Insurance Company (OIC), public sector general insurers led by New India Assurance have lost out heavily in their motor business to private sector companies, which are offering higher commission above the cap set by insurance regulator IRDAI
NIA, United India Insurance and National Insurance Company have seen de-growth in their motor business during the year and together the four companies have shed almost 5 percentage points — from 45 per cent to 40 per cent — of motor business to their private sector rivals in 2018-19.
Public sector companies have attributed their losses in the motor portfolio business to the “unfair market practices and undisciplined market” which has favoured the private sector players after the Insurance Regulatory and Development Authority of India (IRDAI) unveiled new MISP (motor insurance service providers) norms that limited the percentage of commissions that can be paid to the authorised dealers by the general insurance players and benefit the customers.
The regulator has capped payments by insurers to agents and dealers at 19.5 per cent for cars and 22.5 per cent for two wheelers and brought them under its purview as motor insurance service providers from November 2017.
“It is strange that a regulation that has been brought in for protecting the policyholder interest is allegedly not being treated sacrosanct by certain players. We do feel a little disadvantaged to certain extent we are hoping that necessary corrections take place at the soonest,” said a senior official of NIA, largest general insurer in the country. Sources point out that though the PSU general insurers have urged the IRDAI to act on these unfair practices, the regulator is yet to act on the issue. Car dealers work with insurance companies on a commission basis. Dealers normally push the policies of insurers which offer the maximum commission.
NIA has seen its total motor portfolio shrinking to Rs 8,847 crore from Rs 9,095 crore in 2018-19. Similarly, NIC has recorded a motor premium of Rs 6,097 crore (Rs 7,024) while UII has a booked a total motor premium of Rs 6,741 crore (Rs 7,062 crore) during the year.
“Certain players have started circumventing regulations to garner market share in the motor business … other players are taking up the issues at appropriate forums,” said an official of PSU insurance company. SBI General Insurance, the general insurance subsidiary of SBI, also lost premium in 2018-19. Its total premium has fallen from Rs 978 crore to Rs 916 crore during the year as the company stuck to the regulations.
On the prevailing market situation, a senior official of SBI General Insurance said the firm is away from incorrect market practices in motor segment. “Industry is also to blame for this… One can only hope that some good sense will prevail. It also needs regulatory control through proper market discipline,’’ he said. On the contrary, some large private sector players have aggressively expanded their portfolios in 2018-19.
Among the players who have grown their motor portfolios in a larger way: ICICI Lombard General Insurance Rs 6,423 crore (Rs 5,249 crore), Bajaj Allianz General Insurance Rs 4,857 crore ((Rs 4,152 crore), HDFC Ergo General Insurance Rs 3,060 crore (Rs 2,307 crore), Tata Aig General Insurance Rs 3,791 crore (Rs 2,813 crore). Even a one-year old company like Digit Insurance, set up by the partnership of Prem Watsa and Kamesh Goyal, has garnered a total motor premium Rs 855 crore (Rs 74 crore) in 2018-19.