Come April 2010, companies will have to shell out 20 to 30 per cent more to buy insurance covers for property, aviation, engineering, marine insurance and business interruption. Reason: reinsurance rates are hardening, and are likely to go up even more.
Reinsurance means insurance company buying an insurance cover for itself.
“We are seeing encouraging signs in the Indian insurance industry,” said Jan Van Den Berg, AXA, CEO for Asia Pacific General Insurance, who oversees the general insurance operations in 10 countries. “Reinsurance premium rates are rising for property, aviation and other business lines. Therefore, primary insurers will be compelled to raise rates. Next year, the premium rates will rise for commercial lines by 20 to 30 per cent.”
“Private insurers have grown less than the public insurers, which means they have become more prudent in underwriting than the public sector insurers,” added Berg.
When the insurance regulator lifted the price controls from general insurance products a couple of years ago, non-life insurance companies entered into a price war, which resulted in insurance rates for property and engineering falling by 60 to 80 per cent.
Just a handful of insurers managed to net a profit from sale of investments in 2008-09.