The Telegraph
Since 1st March, 1999
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Private insurers lose no sleep

New Delhi, Dec. 17: Private insurers are not running scared of a possible government move that would make it mandatory for them to earn a certain portion of their premium from the motor insurance business.

Motor insurance is fast turning into a red rag for insurers — largely because the public-sector general insurance companies are haemorrhaging on their motor insurance portfolios where claims outweigh premia income by almost 3:2.

Although some private insurers like Bajaj Allianz and Tata AIG have a sizeable motor insurance portfolio, they are not hamstrung by the quota prescription for business portfolio that the government is now considering.

Private insurers, in order to protect their bottomlines, could wriggle out of such a situation in much the same way as banks and telecom firms do.

Foreign banks are required to earmark 20 per cent of their overall credit to the priority sector while telecom companies must ensure that 10 per cent of their network coverage is in rural areas. The banks and telecom firms have no qualms about paying a small penalty for slipping on the mandatory targets. The private insurers could do much the same if the government gives them an escape hatch that will allow them to renege on their commitments.

For now, however, private insurers are blasé about the move to set such a mandatory requirement that minister of state for finance Anandrao Adsul said the government was considering during a seminar in Mumbai last week.

An official from a private non-life insurance firm said, “It should be the prerogative of the insurance company — whether a private player or a PSU — to decide whether they wish to do motor insurance or not.”

“If the government makes it mandatory, we will follow the order diligently, ” he added.

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