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Soft Reinsurance Rates a Worry: National Insurance Company

National Insurance CMD, Sanath Kumar stated that the international rates for reinsurance products have remained soft for the last 6-7 years. The markets have been flush with capital. CAT bonds that are issued for catastrophic events have proved popular as they offer 4-5 times returns.

“Currently some of the insurance portfolios like motor and health have heightened competition; are not profitable and have loss ratios of 150%-160%. In today’s scenario, newer general insurance companies are cutting prices as they are banking on investment income in future. At National Insurance, we don’t believe in lowering our underwriting standards and deliberately stayed away from participation in a few schemes, when we felt giving a lower quote would not be a prudent decision,” says Sanath Kumar.

This leads insurance companies to cut prices knowing that they will still be profitable with the large investment income. The prices for insurance can decrease, the markets become soft and the underwriting standards are lowered.

National Insurance has raised concerns over the growing competition leading to lower rates as cheaper does not always mean the best.

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