This resetting of premiums is expected to rein in growth of non-life insurers in 2007. While total non-life premiums collected are on course to increase by 20-25 per cent in 2006-07, experts are projecting a 5-15 per cent growth in 2007-08 - a blip as premiums find their new levels - and the industry should be back on the high-growth trajectory the year after that.

The one cover that will still be subject to price controls is third-party motor cover, though the way this risk is managed by insurers will change from 2007 onwards. Recently, the insurance regulator, Insurance Regulatory Development Authority (IRDA), increased third-party motor premiums by 50-150 per cent, and asked all insurers to not refuse third-party cover and collectively share this risk. The risk-sharing arrangement takes the form of a ‘motor pool’, which will comprise of all non-life insurers and will be managed by General Insurance Corporation (GIC).

All motor third-party premiums collected by every insurer will go into this motor pool, but claim tabs will be picked up by insurers in proportion to their overall market share. This sharing arrangement is a point of concern for some. Says Rahul Aggarwal, Optima Risk Management Service, an insurance broker: “An insurer may have a small third-party portfolio, but if his overall share is huge, he will have to pay more.”

Says K.C. Mishra, director, National Insurance Academy, an insurance think-tank: “The expenses of primary insurers are capped at 10 per cent, that of GIC at 2.5 per cent. However, due to lack of a robust IT system that can administer the pool at a national level, initial expenses would be around 30 per cent. So, insurers will have to resort to cross-subsidisation.”

... contd.