Public sector insurers incur expenses above the permissible limits

During 2004-05 the public sector general insurers continued to report expenses above the permissible limits on account of additional provisioning for the proposed wage revision and amortised costs of SVRS expenses.

It was envisaged that by trimming the size, expenses towards employee remuneration and benefits would come down. These expenses presently constitute 78.57% (80% in 2003-04) of the total operating expenses and 19.3% (20.45% in 2003-04) of the gross premium underwritten.

During 2004-05, the private sector insurers have more or less met the limits of allowable expenditure. Of the eight insurers, six were well within the specified limits while in the case of two Cholamandalam and HDFC Chubb there was breach of 4% and 13%, respectively.

Section of 40C of the Insurance Act, 1938 lays down the limits for the management expenses in general insurance business. The expenses management is required to be within the prescribed limits under Rule 17-E of the Insurance Rules 1939. The IRDA has been stressing the need for insurers to conform to the prescribed limits.

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