A total of 17 non-life insurance companies collected premium of Rs 3.28 billion by selling private vehicles insurance policies in the 28-month period since the third-party insurance coverage was made mandatory on Sep 1, 2009. [break]But these companies spent only 25.5 percent of the amount, or Rs 837.59 million, settling claims.
In contrast, 93 percent of the premium collected through sales of public vehicle insurance policies was expended on extending compensation, which includes payments released for the purpose of covering third-party insurance claims and claims related to loss or damage of vehicles.
Non-life insurance companies earned a total premium of Rs 1.68 billion through sales of public passenger vehicle insurance product in the 28-month period, while Rs 1.57 billion was spent on settling claims.
“If 15 percent of the premium amount that are extended to agents, reinsurance cost and administrative costs are factored in, insurance companies seem to be making net loss from public vehicle insurance business,” a high-ranking official of the Insurance Board told Republica on condition of anonymity.
The business of insuring two-wheelers, on the other hand, was also found to be profitable, with only Rs 722.32 million of the Rs 1.28 billion in premium earning going for claim settlement purpose. This means 56.4 percent of the premium income was disbursed for claim settlement.
The gross earning-expenditure ratio of two-wheeler insurance business best reflects the situation facing the entire vehicle insurance business, as insurance companies are spending 56 percent of gross premium income generated from motor-vehicle portfolio on claim settlement.
In the 28-month period, insurance companies generated a total of Rs 9.04 billion from sales of policies that provide cover to all types of vehicles plying on the road. Of the amount, Rs 5.07 billion went to making compensations.
This means, every non-life insurance company on average earned Rs 18.99 million in premium per month, while Rs 10.66 million was spent on settling claims.
However, insurers´ net income from motor-vehicle portfolio varies as those heavily exposed to commercial passenger vehicle business are spending up to 90 percent of the gross premium income on claim settlement, while those selling more of private vehicle insurance policies are spending as little as 20 percent of premium amount to extend compensation, the survey report shows.
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