The Hindu Business Line : All third party risks move to Motor pool from Jan

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All third party risks move to Motor pool from Jan

Our Bureau

Bangalore , Dec 7

All third party risks are to be transferred to the India Motor Insurance Pool from the beginning of next month, in line with the insurance regulator's directive, virtually levelling the field between public and private sector players.

The Insurance Regulatory and Development Authority's (IRDA) notification said that all the insurance companies "shall collectively participate in a pooling arrangement to share in all motor third party insurance business underwritten by any of the registered general insurers."

The pool, referred to as the India Motor Insurance Pool, is to be administered by General Insurance Corporation of India.

The regulator took the decision after two rounds of discussions with CEOs of all 12 non-life insurance companies.

According to the arrangement, all private sector insurers would have to contribute to the pool consistent with their market shares.

The private sector currently has a market share of 40 per cent in the general insurance business.

Speaking to Business Line, the National Insurance Company Chairman and Managing Director, Mr V. Ramasaamy said: "Creation of the pool will help the public sector insurers to contain third party liabilities."

The private sector insurers response on the IRDA fiat was guarded. When contacted, Mr Dalip Verma, CEO of Tata AIG General Insurance Company, said: "This is still lot of work to done on the issue."

But the reality is that not many private sector general insurers are happy with the IRDA's fiat.

Sources said that has high retention ratios are a major reason for the discontent among the private sector companies, which had so far kept away from commercial vehicle third party risks. After the statutory reinsurance of 20 per cent, the retentions would still be 80 per cent.

Moreover, unlike normal risks, there is no ceiling and consequently no provisions can be made. The high claims of close to 200 per cent will, therefore, have to be met directly from the respective balance sheets of the individual companies.

Besides, in the event of reconciliation the private sector insurers would also be expected to bring in a proportionate share for meeting the claims, irrespective of the underwriter.

This is likely to dent their profitability, the sources said, especially in a situation when claims settlements continue to remain complicated.

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