Public RelationsPrivate players seek end to third-party motor pool
While the Insurance Regulatory and Development Authority (Irda) is working on making third-party motor cover obligatory for non-life insurance companies along with rural and social sector obligations, private insurers want to abolish the fund, which is used to pay claims in this category.
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The proposed amendment in the Insurance Act, 1938, mandate insurance companies to write a minimum limit. General Insurance Council Secretary General S L Mohan said the government would decide on the quota for the insurers after the Act was amended.
Since insurers are reluctant to write third-party motor insurance policies due to the high claims ratio, the insurance regulator created a fund to which all non-life insurers contribute. All third-party motor claims are settled from this pool.
While Irda has sought feedback on the pool, the private players have expressed reluctance to contribute to the fund. Public sector insurance companies want the fund to continue but have sought a revision in prices.
“It is a common grazing ground where ownership is not defined. Under the third-party motor pool, the claim settlement is delayed. The abolition will lead to better and faster settlements,” said Gaurav Garg, MD and CEO of Tata AIG General Insurance.
“We feel that as far as there is an administered price regime for third-party rates, the pool should continue so that it can take care of the supply-side constraints,” said M Ramadoss, CMD of New India Assurance.
In 2007, when the rest of the industry was detariffed, it was decided to keep third-party rates regulated. However, Irda announced a 150 per cent increase in third-party rates to make the category attractive for insurers. But this increase was pared down to 70 per cent after opposition from transporters, who feared a huge rise in costs. Irda has asked insurance companies to take transporters into confidence before approaching it for a rate revision.
“We would like the premium rates to be revised. The rates were quoted quite low. So, we have been pleading with Irda to revise the rates. We have to engage the transporters too. We have been saying that the rates be actuarially priced,” Ramadoss said.