Expressing concern over rising losses of the public sector insurance companies,finance minister Pranab Mukherjee today asked them to curb unhealthy competition in underwriting premiums and rationalise product pricing.
I have few concerns in the general insurance non-life sector where the insurance market is structurally challenged in terms of profitability. India is the only country in Asia with a combined ratio of 105 and above consistently during the last 5 years and all the four PSU general insurance companies have been largely responsible for such a trend, Mukherjee said at the annual review meeting of PSU insurance companies.
The four state-owned general insurance companies New India Assurance,National Insurance,Oriental India Insurance and United India Insurance have been facing huge underwriting pressure since 2007 when the pricing of insurance products was deregulated. Among all the four insurers,United India Insurance was the only company to report profits during 2011-12.
According to a finance ministry note,the underwriting losses,which stood at a whopping Rs 6,134 crore during 2011-12 is concerning. Growth in top line cannot be at the cost of bottom line,the note stated.
The ministry has suggested certain steps to curb the unhealthy competition in underwriting premiums,as mentioned the note.
Later talking to reporters,financial services secretary DK Mittal,said,The non-life insurance companies made a loss of around Rs 6,500 crore in 2011-12,of which motor insurance segment accounted for 50 per cent.
There is no point in growing without making profits. All four general insurers will have to devise ways to rationalise the product pricing, Mittal added.
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