Insurers see rise in health claims; lockdown reduces motor segment demands

During the lockdown, very few vehicles are plying on the road, which means there will be less number of accidents resulting in lesser intimation of claims.
Non-life insurers are seeing a rise in claims in the health segment but the own damage claims in the motor segment is on the decline because of the 21-day lockdown imposed to check the spread of Covid-19.

During the lockdown, very few vehicles are plying on the road, which means there will be less number of accidents resulting in lesser intimation of claims. Fewer claims are supposed to improve the insurers’ loss ratio in the motor segment, but the industry is divided on this.

Loss ratio indicates the underwriting performance of an insurer. If it is above 100 then premium collected is not adequate to pay claims. The industry is operating at a loss ratio of 80 in the motor segment. “We will have a 1-1.5 month period where accidents won’t happen, which will bring in a 10 per cent impact on the loss ratio,” said Sajja Praveen Chowdary, motor business head, PolicyBazaar.

Sanjay Saxena, head of retail claims at Bajaj Allianz General Insurance, echoed the statement, saying the losses would come down in the segment given lower incidence of claims.

On the other hand, few insurers feel although claims intimation is currently less, there might be a spurt in claims post the lockdown. “The real clear picture will emerge only after the lockdown period gets over, as there is a possibility that we can see a backlog in claims. There are chances that policyholders may not be able to file their claims considering workshops are currently not operating,” said Subrata Mondal, executive vice-president, IFFCO-Tokio General Insurance.

“Loss ratios are a function of accidents plus repair costs, labour charges, and spare part cost. Most of the manufacturers go for a hike in these things from April. The insurance industry has not increased any rates in the past six months and nor has the third party rates gone up. So, loss ratios may go up as opposed to going down,” said the chief executive officer of private insurance company.

“Whether loss ratio in motor segment will come down significantly depends on how long the lockdown stays. In the motor segment, the third-party claims do not come to us immediately. So if the third party claims will go down or not is something we will see in the future,” said Sanjay Datta, chief underwriting & claims, ICICI Lombard.

Moreover, the motor insurance segment has been going through a lean phase for the past one year as the economic slowdown resulted in low demand for new vehicles. A similar situation is expected post the lockdown period. Experts say the first two quarters of this fiscal year will see muted demand for the automobile sector and this in turn will bring in increased competition in the motor segment amongst the players.

“Insurance companies will take advantage of this fall in loss ratio and become more competitive in nature resulting in the own damage prices going down over a period of time,” said Chowdary.

“As of now it seems there will be less claims. Lesser claims may impact the premium rates as well,” said Mondal.

In the motor insurance segment, the motor third-party is mandated by law. The third party motor premiums are revised annually, however, this year’s hike has been put on hold given the ongoing situation. Experts feel this will hurt the insurers.
The premiums for own damage segment is not regulated. Due to competition, insurers generally resort to heavy discounting to gain customers. Due to regulated third-party premiums and discounting in own damage segment, the loss ratio remains high in the segment.


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