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C. Shivkumar

Bangalore , Sept. 10

PUBLIC sector insurers have opposed moves for the separation of motor insurance products into property and liability risk covers.

Sources said the four public sector insurers - New India Assurance Company Ltd, National Insurance Company Ltd, United India Insurance Company Ltd and Oriental Insurance Company Ltd - have indicated that the package policy and the `liability only' policies were more acceptable to them. This auto risk product profile was similar to the bouquet of policies available in the US markets.

Alternatively, the PSU insurers have preferred to retain the existing product bouquets in theircurrent format.

The package covers including risk covers for both asset and liability. This package policy allows for coverage of the automobile (asset), the driver/owner and third party liabilities. The `liability only' covers provide for compensation of third party losses.

These proposals for separate property and liability covers have been pushed by some private sector general insurers with the Insurance Regulatory and Development Authority.

The proposal for separate risk products implied a differential pricing strategy. Since claims in the personal automotive (property) segment were low , the separation would lead to distortions, the sources said. Such distortions were likely to drive down the premia for the property segment of motor insurance, especially in the case of personal automobiles.

Premiums for motor vehicles are currently about 3.2 per cent of the declared value. This segment currently has a low claims ratio of about 70 per cent of the premium collectedand consequently were extremely profitable.

The sources said the separation would lead to the liability covers being passed on to the public sector and the asset/property covers would be cornered by the private sector, by undercutting tariffs.

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