Buying general insurance such as health, motor or property cover could cost more from April. The finance ministry has asked the national reinsurer, General Insurance Corporation, to stop underwriting loss-making businesses. The government has also said if insurers take on loss-making businesses, they should bear the risk in their books or increase premium rates.
While insurance companies have a choice in accepting or rejecting insurance proposals, GIC has to accept the risks that are passed on. In addition to the compulsory portion, insurance companies reinsure other parts of their portfolio with GIC to protect their own balance sheets.
In a communication on February 7, the finance ministry has informed GIC that it should not provide reinsurance for covers that are loss-making and, for such covers, insurers should make arrangements on their own or take risks on their own books.