Motor insurance losses for general insurance companies may exceed 230% in the current fiscal year ending 31 March 2019 (FY2019), a sharp rise from the level of around 140% at present.
The higher losses are because the increase in motor third party premiums was not as much as the industry had expected, reports Forbes India. Motor third-party liability insurance premiums are set by the regulator, IRDAI.
In addition to this, the Ministry of Road Transport and Highways has now made it mandatory for insurance companies to pay out a minimum of INR500,000 ($7,400) to road accident victims claiming on third party insurance. This move was made because of the increasing cost of living. This is a 10-fold increase from the earlier proposed compensation amount of INR50,000.
"Motor premiums only went up by 10-15% this year on an average as against a demand of 30-40%. We are facing high claim ratios in third party motor and the situation is set to worsen after the INR500,000 mandatory third party claim," said the head of claims at a mid-size private life insurance company.
The government has said too that insurance claims on and from 1 January 2019 will see an annual increase of 5%. Furthermore, there is no cap on the maximum insurance compensation that can be sought by the kin of a victim of a road accident. Insurers have sought a cap on the compensation to be paid out in case of death.