Insurance Regulatory and Development Authority (IRDA) has capped the extent to which insurers can hike premium on third-party cover for vehicles after it discovered that insurers were quoting high premiums as a ploy to avoid writing this loss-making but statutory business.

IRDA, in yet another communication to insurance companies warning them against avoidance tactics when confronted with a proposal for third-party cover, said that policies have to be issued within a day. The regulator has also asked insurers to avoid `dilatory tactics’ by calling for a great deal of unrelated information or insisting on holding the vehicle documents for several days.

Withdrawing the facility to charge more for vehicles with an adverse claims experience, IRDA said, “It has been represented that the matrix for loading in premium circulated with the Tariff Advisory Committee circular in ‘03 is being misapplied and is causing harassment to vehicle owners.”

It added that the matrix for loading was issued to avoid arbitrary loading, and it now transpires that this has led to undesirable practices. “It has now been decided that the application of the matrix shall stand suspended with immediate effect,” the circular said.

The withdrawal would mean that henceforth insurers could, at most, double their premium twice if the cover results in continued third-party claims. Insurers say that against a premium of a few hundred rupees the average claim works out to over Rs one lakh. This makes the business unviable even if one in a hundred policies translates into a claim.

IRDA has once again warned the new private insurance companies from avoiding motor insurance. “It has also been reported that besides the public sector insurers, the newly-registered insurers are refusing to entertain requests from commercial vehicle owners for third party motor insurance.”

Directing them to accept third-party proposals, IRDA said that failure to comply with this direction would be taken seriously and action would be taken against the insurer concerned.

(http://economictimes.indiatimes.com)