The main heading on the front page of today's Times of India (Bangalore edition) pissed me off no end and hence this rant. The piece brings up some grisly statistics (40,000 people killed in road accidents in 2007, 1.5 Lakh injured, of whom only a small fraction were able to benefit from insurance. A large number of this was due to the vehicle not having insurance at all and an equally large number because of claims not settled by the insurance companies. Shocking data indeed. Here is where Times of India puts an unconventional spin on it. The headline expresses remarkable sympathy for the insurance companies by saying
Instances of wrong selection of data to be produced and unfair use of revealed data abound.
First they come up with some random estimate that merely Rs. 15 lakhs were collected from the vehicles on whose behalf payments were made. I call it random because it seems so far fetched. They themselves fix the premium to be between 600 (for private cars) to 1500(for commercial vehicles). Something tells me there are some categories for which there are premiums lower than this also but let us take 600 to be mean. To earn 15 lakhs in premium at this rate the insurers need 2500 subscribers. If 4000 crores is paid out on behalf of these subscribers then it comes to an astonishing 1.6 crores in claims against each subscriber claimed against. I cannot accept 1.6 crores to be the average motor vehicle insurance payout in this country. For this I can't give any reason or data to back up but I have never heard of a settled claim higher than a couple of lakhs (the key word here is settled, there have been higher claims of course).
Anyway, the way the insurance business works, isn't it a given that the amount the insurers make from from people who do end up in accidents is less than what they pay them but is compensated for by the money they make from their other subscribers?
Again I regret my inability to produce data to support this but from what I know the average insurance payout is in anycase dismally small compared to most other countries (not just OECD types, even the moderately developed Sri Lanka and Brazil types)
India is a very very huge country by all standards. Media should not try to confuse or scare people with huge numbers. Especially when they are hiding huger numbers which would definitely dwarf the numbers they are using. For example the number of automobiles in India, the number of insured vehicles and the revenue these companies earned from all insured vehicles.*
I submitted to my university a research paper on Motor Vehicles Insurance as part of the Insurance Law course. I cannot say it was of great academic merit but I made a couple of common sense observations there. One that there should be a some common fund to which all vehicle owners contribute (by means of taxes of course) which will be used to compensate victims where the offending vehicle is not insured. I pointed out the existence of such a system in UK and the reason behind it is simple. In all the road accidents I've seen or heard of, never had the victim a chance of first ensuring that the oncoming maniac driver had third party insurance.
I like to keep the dark side of my life (the academic side) away from this blog. But Times of India forced me into this.
I'm never one to make random allegations unless they are nagging me real bad. Here goes one - Is it possible, that some newspersons are tweaking press releases by PR agencies working for insurance companies so as to make them look all victimized?
I normally don't invest this much energy into criticizing some random news paper piece. But it is a boring afternoon and this was on the front page and so glaring.
* The automobile industry in India is immense, producing 23 lakh automobiles in 2008 alone. Now if only 30% of these vehicles (6,90,000) are insured, as he says 70% aren't, at 600 Rs. (These are just four wheels and above. So Rs. 600 is the lowest possible logical average.) That is still a whopping Rs. 41,40,00,000. Why didn't this figure come up in the whole piece?
Highway accidents bleed insurance cos
Rs 4,000 Crore Paid Out Every Year In Compensation
Instances of wrong selection of data to be produced and unfair use of revealed data abound.
First they come up with some random estimate that merely Rs. 15 lakhs were collected from the vehicles on whose behalf payments were made. I call it random because it seems so far fetched. They themselves fix the premium to be between 600 (for private cars) to 1500(for commercial vehicles). Something tells me there are some categories for which there are premiums lower than this also but let us take 600 to be mean. To earn 15 lakhs in premium at this rate the insurers need 2500 subscribers. If 4000 crores is paid out on behalf of these subscribers then it comes to an astonishing 1.6 crores in claims against each subscriber claimed against. I cannot accept 1.6 crores to be the average motor vehicle insurance payout in this country. For this I can't give any reason or data to back up but I have never heard of a settled claim higher than a couple of lakhs (the key word here is settled, there have been higher claims of course).
Anyway, the way the insurance business works, isn't it a given that the amount the insurers make from from people who do end up in accidents is less than what they pay them but is compensated for by the money they make from their other subscribers?
Again I regret my inability to produce data to support this but from what I know the average insurance payout is in anycase dismally small compared to most other countries (not just OECD types, even the moderately developed Sri Lanka and Brazil types)
India is a very very huge country by all standards. Media should not try to confuse or scare people with huge numbers. Especially when they are hiding huger numbers which would definitely dwarf the numbers they are using. For example the number of automobiles in India, the number of insured vehicles and the revenue these companies earned from all insured vehicles.*
I submitted to my university a research paper on Motor Vehicles Insurance as part of the Insurance Law course. I cannot say it was of great academic merit but I made a couple of common sense observations there. One that there should be a some common fund to which all vehicle owners contribute (by means of taxes of course) which will be used to compensate victims where the offending vehicle is not insured. I pointed out the existence of such a system in UK and the reason behind it is simple. In all the road accidents I've seen or heard of, never had the victim a chance of first ensuring that the oncoming maniac driver had third party insurance.
I like to keep the dark side of my life (the academic side) away from this blog. But Times of India forced me into this.
I'm never one to make random allegations unless they are nagging me real bad. Here goes one - Is it possible, that some newspersons are tweaking press releases by PR agencies working for insurance companies so as to make them look all victimized?
I normally don't invest this much energy into criticizing some random news paper piece. But it is a boring afternoon and this was on the front page and so glaring.
* The automobile industry in India is immense, producing 23 lakh automobiles in 2008 alone. Now if only 30% of these vehicles (6,90,000) are insured, as he says 70% aren't, at 600 Rs. (These are just four wheels and above. So Rs. 600 is the lowest possible logical average.) That is still a whopping Rs. 41,40,00,000. Why didn't this figure come up in the whole piece?
3 comments:
2 points.
1. Is the article referring to 15 Lakhs as the income only from the people to whom it paid the payouts?
2. The article says interest represents the huge chunk of the 4000 crores. Is the interest rate compounded for each year?
Hi,
1) Yeah, It does look like the income from people on whose behalf it made payouts. At least that is what it seems from the second line though I doubt the accuracy of this number also.
2)I'm not sure how the interest is calculated. May depend upon the MACT order I guess.
But you've pointed out another relevant thing. If they are paying a lot of interest, they shouldn't be cribbing about settling out of court.
Yes, true.
But honestly, this whole 4000 crore point itself is a true surprise to me. Wonder whether,there is any planned scandal going on the Claims area! (Thanks telgi scam, mind is always in doubt :))
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