The finance ministry has expressed its concerns over rising losses of non-life public sector insurers. These insurers have reported loss of over Rs. 65 billion in 2011-12, of which motor insurance segment accounted for 50%. According to the ministry, these losses were due to the lack of practical underwriting.
On 13th June, finance minister Pranab Mukherjee said non-life public sector insurers want to become a market leader. Their overall profitability is based on investment income, but there is constant fall in the main business of premium underwriting. Mr Mukherjee has asked, insurers to reorganise their branch network and open offices in smaller towns by end of June.
He further added, insurers should focus on other channels of distribution such as bancassurance. To target rural areas, Mr Mukherjee asked state-run Life Insurance Corporation of India (LIC) to design a Kisaan Bima Yojana, a life insurance plan for farmers where the coverage can be extended up to the age of around 70 years.
Earlier, in a letter to state-run general insurers in May, the finance ministry had asked them to increase premiums on health insurance, motor and other policies. The letter was addressed to National Insurance, Oriental Insurance, New India Assurance and United India Insurance. The government—as a promoter shareholder in these public sector insurers—is concerned about the losses which some of these companies have made.