| | Maruti Suzuki to Start General Insurance Firm
Maruti Suzuki India Limited is planning to start up a general insurance firm for their customers in collaboration with a local insurance company. Read more details below:
The Insurance Regulatory and Development Authority (IRDA) have banned MSI for selling motors insurance to its customers. MSI has been selling motor insurance under its umbrella brand, Maruti Insurance, since 2002. In the current fiscal year, Maruti has already sold as many as 2.5 million policies, but would not be selling any more as the IRDA has cancelled its agency license, an IRDA official revealed. This move comes in the wake of car insurance companies alleging that Maruti service stations were inflating bills and pushing them into losses through hefty claims.
“We are recasting our business model as directed by IRDA. In the meantime, we are ensuring that there is no impact on customers,” said Kanwaldeep Singh, general manager (corporate) at Maruti Suzuki. “We are looking at floating a new insurance company in joint venture with an Indian company. It may also be a three-way joint venture.”
Foreign companies are not allowed to hold more than 26% of any Indian insurance venture. And as Suzuki hold majority stake in Maruti, it will not be able to hold a 74% stake, which means that it will be a three way joint venture. “Considering the scale of Maruti’s operations, it would benefit both Maruti and its customers,” said an insurance expert at a large consultancy company, who did not want to be named. Internationally, we have seen car makers like Ford Motors and Mitsubishi entering entered into the motor insurance business to cater to their customers. Until now, Maruti was working as an agent for six major general insurance firms, including National Insurance Co. Ltd, New India Assurance Co. Ltd, Iffco-Tokio General Insurance Co. Ltd and Bajaj Allianz General Insurance Co. Ltd.
“Some car companies have been eating into the profits of the general insurance companies. They have been producing inflated bills against the claims made. IRDA will not allow such car companies to sell insurance unless they change their business model,” said the IRDA official.
Of the 23 non life insurers in India, 17 sell motor insurance. The non-life insurance industry has been incurring huge losses due to inflated bills in both motor and health insurance businesses. With around 50% market share, motor insurance accounts for the largest share in the general insurance industry. Car companies contribute to a considerable part of the country’s total motor insurance business.
“Inflated bills against insurance claims have resulted in a loss ratio of 100-110% in the motor and health insurance business,” said another IRDA official. Car companies sell motor insurance with their new cars, along with a promise of hassle-free and cheaper motor insurance. The premium offered by the car companies is often lesser than what the customers would pay in case they bought the cover separately. In case of a motor accident, the cars dealer takes the responsibility of getting in touch with the insurance company, surveying the car and claiming the money from the insurer. And the car owner pays only the difference between the overall expense and the insurer’s contribution.
“While Maruti will not be able to facilitate or offer an interface to its customers till it forms the insurance firm, its dealers will make the necessary arrangements for the customers,” said the head of a Mumbai-based Maruti dealer, who declined to be named. Maruti provides service support to customers at 2,740 workshops in at least 1,335 towns and cities. (Courtesy: Carazoo.com)