It’s a tough drive for general insurance companies. With an estimated 50% registered uninsured vehicles and motor claims of over 200%, nationalised general insurance companies have little choice but to wait for the detariffed regime to come into force next January, when market-driven premium rates will hold sway. Motor third party insurance losses are estimated to be around Rs 2,400 crore.

Worse still, the insurance regulator’s warning general insurance companies should not turn down mandatory insurance (third party - TP), which drive 80% of the motor policies in India, has put nationalised companies in a fix.

With the sole intention of reducing losses, most companies, including PSUs, have in recent times been choosy and a little cold in providing third party covers to certain classes of commercial vehicles that have high incidence of claims. “While providing covers, we ask for some details at times. Most of the private insurers flatly refuse just TP covers, following which these vehicles come to public players. PSU companies are not merely social service providers,” said a PSU insurer.

The Insurance Regulatory & Development Authority (IRDA) in its directive on April 22, 2006 states: “Insurers are either refusing third party covers, especially for commercial motor vehicles or adopting dilatory tactics, designed to make it difficult for vehicle owners to get cover. Public sector and newly registered insurers are refusing to entertain requests from commercial vehicle owners for motor TP.”

It further states: “While the insurers are at liberty to set their own business underwriting and development policy, considering the legal requirement of third party insurance, no insurer shall refuse to grant such cover on request.” A senior official of a nationalised company said, “We are anyway coping up with losses and the only way to get out of this is to wait for the detariff regime to set in.

Interestingly, motor insurance in India garners almost 40% of a state insurer’s total premium. It apparently is the most cash rich portfolio that adds to the insurer’s revenue on a daily basis and yet is a bleeding portfolio.

Insurers said that the only solution left would be to tackle the unlimited liability on TP insurance and set premiums at higher than the existing levels according to risk and claims experience.

(www.dnaindia.com)