The international financial markets are in turmoil. AIG, the largest insurer is in deep trouble. The share prices of major American life insurers are dropping steeply. There is increasing nervousness, among the Indian policyholders about the future direction of the Indian non-life insurance markets. In 2007-08 the private players have made underwriting losses of large magnitude. In fact, two insurers have incurred net losses, after their investment incomes. Do private insurance players have the required skill and expertise to weather the stormy clouds gathering on the Indian horizon in the detariffed scenario? This article analyzes the past results and warns of the dangers ahead.

The non-life insurance market went into a free rating regime effective from January 2007. The only exception constraining it was the premium rating on Motor Third Party (TP) segments which was kept under the regulator's control and discretion. There were doubts expressed, of course, if the market players would responsibly use the rating freedom given to them so as to leverage the liberalized premium rates, based on their perceived risk exposures, rather than the earlier generalized view of the category of risk. This article evaluates how the eight private insurance players in the game from 2001, have used this rating freedom in 2007-08, and with what financial results to themselves. Prior to detariffication, the private players had a market share of 35% of the total market premium.

With the newly given freedom to quote rates, they have improved their market share to 42% of the total market premium of Rs. 28,500 cr in 2007-08. The 7% rise in the market share is indeed impressive, considering the fact that their past annual accretion rate was 5% in the last two years. Their premium volumes at gross level are Rs. 11,890 cr in 2007-08 against Rs. 8,726 cr in 2006-07.

The premium growth of Rs. 3,166 cr has mainly come in from motor that has shown a growth of Rs. 2,530 cr and health segment has shown a growth of Rs. 600 cr. Incidentally, these are the only two major growth segments in the non-life insurance sector today. Their overall earned premiums have grown from Rs. 3,682 cr to Rs. 5,882 cr, an increase of Rs. 2,200 cr. The motor segment has shown a growth of Rs. 1,560 cr and health of Rs. 370 cr.

Detariffication, Non-Life Private Insurance Players, International financial markets, Non-life insurance markets, Investment incomes, Indian policyholders, Management costs, Stock markets, Strategic goals, Free market economies, Reinsurance markets.