INSURANCE COS WILL SACRIFICE PRUDENCE TO GARNER MARKET: ICRA

New Delhi: Credit rating agency ICRA has expressed the fear that private sector general insurance players will sacrifice prudential pricing norms in their bid to garner market share, following removal of mandatory price restrictions on certain schemes.

"With the price-based competition being intense in the post-de-tariffed scenario, concern for market share is likely to override price discipline in the industry in the near term," said ICRA in its report 'Indian general Insurance Industry- An Update'. After the de-tariffing of the general insurance sector last year, the price-based competition in the market has intensified and unlike earlier times, when private players were growing at the expense of the public sector, there has been a churn in the market share among the private sector players as well, the report said.

This is likely to have a significant impact on profitability and capital requirement of the business as well, it added. The government had gradually removed price controls on major insurance businesses like fire, engineering and own damaged motor insurance. Presently, only third party motor insurance is under price control.

Currently, there are 14 active players in the general insurance business, including four from the public. Over five years, the private sector has captured over 60 per cent market share and the gap between private sector and public sector has "narrowed substantially," the report said.

Source: PTI, The Economic Times