Sarbajeet K. Sen
New Delhi, July 22
THE Insurance Regulatory and Development Authority (IRDA) has held that insurers have the freedom to increase premium rates even if there have been no adverse claim experience during the previous year.
The IRDA's latest view appears to contradict its May 2002 order that loading (increasing premium) is permitted only if the insurance company has experienced an adverse claim during the earlier policy.
The IRDA Chairman, Mr C.S. Rao, has now said: "On careful examination, it is seen that loading on premium will be necessary even if the policy is claim-free for an year."
The regulator has held that this is justified "since rating (for loading purposes) is done based on various other risk perceptions also as elaborated in the matrix (prepared by Tariff Advisory Committee in June 2002)."
The loading matrix includes parameters such as incurred claims experience, claims during the past five years, age of the vehicle, and age of the driver.
Points are given against each parameter, with the loading amount dependent on the aggregate points scored by the insured.
Mr Rao has said that the matrix "takes care of not only claims but also other adverse factors."
The All-India Confederation of Goods Vehicles Owners' Association, to whom Mr Rao has sent this communication, has decided to contest IRDA's stand.
"We will challenge the latest order in every possible manner," said Mr Chittaranjan Dass, Vice-President.
In May 2002, the then IRDA Chairman, Mr N. Rangachary, had said: "Insurers may load the third party tariff motor premium by 100 per cent if the claims of any individual owner is adverse as per the insurers' assessment. If experience continues to be bad, then a further loading of 100 per cent on the expiring premium can be charged. Insurers may not load the premium any further."