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Better days ahead for Indian General Insurance Companies

Lloyd‘s of London is a highly esteemed name in the global insurance industry. When it comes to India, the company is open to take whatever the government is offering as they want to do the business no matter what. The company isn’t alone. Prem Watsa, Warren Buffett of Canada thought of cashing out on the general insurance tide being backed up with the power of the Indian financial titan Prem Watsa is willing to playing a gamble at his own end with a partner other than ICICI. 

Watsa has 35 percent stake in ICICI Lombard i.e. a unit of ICICI Bank, and he is pitching in to get a license from the Insurance Regulatory and Development Authority of India in order to set up a general insurance firm which would be well equipped to compete with the Indian insurance key players such as Oriental Insurance and New India Assurance and private giants such as HDFC Ergo.

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During the past 17 years ever since the private general insurance players got a green signal to enter the industry, there have been very little changes nearly for a decade. Most of the companies were facing losses due to the controlled prices and the claims settlement process. 

The time is here when this could change for the best. New players that will enter the insurance market would bring very little to destabilize the insurance market dynamics. The insurance industry is worth Rs 1.25 lakh crores. As of now, the insurance market was offering attractive discounts in order to grab the market share. It is going to change now, for good.

Apart from Lloyd, Edelweiss and DHFL are also willing to compete with Watsa’s company. Global reinsurance players such as Swiss Re, Munich Re etc. have applied to seek the challenge in the monopoly of GIC Re in Indian insurance sector. India’s general insurance sector, which handles writing insurance plans from bike, cars, and commercial vehicles to medical insurance, generates a yearly premium of Rs 1.25 lakh crores on average. To the present date, it is highly dominated by the public sector insurance companies. ICICI Lombard, HDFC Ergo and Bajaj Allianz General Insurance have progressed with improving market share.

Improving technology, changes in the regulations comprising the provisions of the Motor Vehicles Act, and the improved data availability helps a lot to eliminate the frauds. Things started changing in 2007 as the insurance regulator came up with the detariffication policy, which is not applicable for the third-party vehicle insurance. 

It is the areas where the insurance regulator retains the price control. It has hiked the third-party insurance premium 100% during the past five years. At present, the insurance companies are in charge of risk assessment and their profit protection. For cars falling in the category of below 1000 cc engines such as Kwid, Alto, and, Nano; the insurance premium was hiked by 40 percent. For segment B or compact cars having the engine capacity of 1000cc or 1500cc the insurance premium was hiked by 40 percent but for sedans, the premium was hiked up by 25 percent.

The breath of fresh air is that the third-party loss ratio has decreased over the past few years. Over the next few years, general insurance sector will provide the economic profit. Technology is used as a tool that helps insurance companies to uplift their fortunes. Thanks to the technology motor, travel, and health insurance plans are brought online. If we compare India’s online insurance sale, it is very less as compared to the UK and US

Insurance providers share the data in order to detect frauds in the system. They have tied up with the companies to combat the frauds. They conduct the training sessions for the claim assessors, the claims decision makers so that the proper evidence records can be maintained and such frauds can be reported. Insurance companies have blacklisted 70 plus locations in order to prevent fraud claims. The government’s decision to list 5 Indian general insurance firms after hiking the limit of foreign direct investment to 49 percent has widened the scope of the growth of the insurance market.

The general insurance sector is expanding robustly at 15-18 percent over the past few years, but the insurance penetration remains stagnant at 0.7 percent. The growth is achieved by the better profit percentage. The insurance sector rectifies the mistakes made in the past and it is heading to the better days. As the government insurance corporations are becoming public, a better indication on the valuation would raise the expectations from the industry. Increasing transparency and the informal sector becoming formal, more opportunities for the general insurance companies is expected.