July 17, 2017
To ensure the financial stability of the PSU general insurers, government has ordered for the strict adherence to the prudent underwriting practices.
The Department of Financial Services under the Ministry of Finance sent a letter to the heads of all Public Sector Unit (PSU) general insurers on 28 June 2017 in this regard. The letter said: “To ensure that unhealthy underwriting practices in these companies do not cause unnecessary financial strain on their financial stability, it is desirable that prudent underwriting practices suggested in government advisories are followed strictly.”
A senior official of the Financial Services Department has confirmed by stating “It is true that we have noticed the gross misuse of underwriting rates in almost all general insurance firms in India. So, we have decided to take prompt and corrective action against those wrongdoings in the interest of customers/policy holders in this matter. We have also asked the Chairmen and Managing Directors of all PSU general insurers to kindly note the concern and strictly focus on prudence in underwriting.”
This move from the government is due to the fact that even after 17 years of liberalisation, the insurance industry continues to register huge underwriting losses every year, and it is an investment income which drives the growth of the industry.