Opinion

Motor insurers have been raking it in

Ganesan Rajkumar | Updated on July 15, 2020 Published on July 15, 2020

On the fast lane Insurers have enjoyed the benefits of fewer claims, with the same premium revenues ISTOCKPHOTo   -  ISTOCKPHOTO

Lockdown has reduced traffic and accidents, forcing motor users to stay indoors. IRDAI should consider premium refund

As the Covid crisis rages across the globe, Indians have abandoned highways and roads to help reduce the spread of the virus. The lockdowns imposed since the last week of March have essentially left a very large section of the population home-bound. These are unprecedented times, when people are driving significantly less. This has expectedly led to a fall in the number of motor accident claims nationwide.

Customers have paid premiums on vehicles gathering dust during the lockdown. Should the insurance companies adjust monies available with them, back to their loyal customers? The role of the Insurance Regulatory and Development Authority of India (IRDAI) on regulating insurers to honour their ever-emphasised promises needs closer evaluation. It is also an opportunity to experience first-hand the regulator’s duties under the Protection of Policyholders Interests Regulations, 2017 and examine why is it still hesitating to act.

Insurers’ bulging purse: The provisional gross written premium (GWP) income by 34 non-life insurers within India for FY 2019-20 is ₹1,89,301.76 crore, of which the GWP under the motor portfolio within India for 2019-20 (for both motor own damage and motor third party) is ₹69,208.14 crore. So, on an average, India’s motor premium per month is ₹5,767.34 crore. Assuming the total number of lockdown days is 60 (more with lockdown 5.0), claim-free premiums available with insurers are worth ₹11,534.70 crore.

Lockdowns are the best-case scenario for insurers as there are fewer vehicles on the road, meaning fewer accidents and fewer claims. Fewer claims mean extra profits. Insurers are better off than before because of this crisis and, therefore, there is a compelling necessity to offset the above risk-free premiums based on the claims cost saved during the lockdown. The IRDAI cannot be a mute spectator to this enrichment.

Protecting the insured: Right now, millions of families across India are facing unforeseen pressures on their finances as a result of Covid. Indisputably, lockdowns have affected the common man’s standard of living. This is exacerbated by the ever prohibitive insurance premiums, fuel price hikes, revenue loss due to social distancing norms, EMIs and taxes. The insurance industry should be living up to its responsibilities to the economy during this unprecedented crisis by making life less miserable for millions of policy-holders and their families struggling for liquidity, and small businesses and traders with no revenues, all of whom are hard-pressed because of the pandemic.

The IRDAI should not desert its policy-holders at this point of time; it should put money back in people’s pockets when they need it the most.

Tariff provision for laid-up vehicles: Motor insurance in India cannot be transacted outside the purview of the India Motor Tariff. The reference here is to General Regulation GR 31 of Indian Motor Tariff-Concession for Laid-up Vehicles — where an individual vehicle laid up in the garage and not in use for two months will be entitled for deductions in renewal premium, or, the expiry of the current period of insurance may be extended equally to the period of laid-up for both third party liability and package policy. When the whole country’s traffic is laid up because of a lockdown, the Indian Motor Tariff GR would be squarely applicable.

Armed with such a Regulation, one wonders why there is so much hesitation among insurers. It’s time the IRDAI nudged the industry on its accountability and not to rely on fine print and technicalities to avoid refund adjustment or interpret policies to their own advantage. The 60-day lockdown premium of ₹11,534.70 crore is to be accounted for.

Ignoring a precedent: The IRDAI cannot be blind to the goings-on in its own market. In the first week of April, Acko General Insurance Ltd, a company licensed by the IRDAI, announced that due to the hardships faced by people amid the coronavirus outbreak, a one-month insurance extension would be given to car and bike owners. Was GR 31 applied, or was this due to Acko’s wise corporate governance, worthy of emulation by the industry? Why aren’t the other major insurers following Acko?

The IRDAI’s silence is deafening and intriguing because here is a shining example put forth by one of the companies it regulates, doing what’s best for the policyholders. What is holding back the IRDAI, and why the hesitancy to crack the whip on the other insurers?

Poor versus privileged: Flights were cancelled and vehicles banned from roads because of the government’s action. However, the IRDAI was only too willing to approve insurers’ offering of relief to air travel insurance policy-holders. If a policy-holder wished to cancel travel insurance (due to the cancellation of a trip), insurers offered a refund of the insurance premium and cancelled the policy free of cost. Why can’t this be replicated for road users?

After all, road travellers, too, had their trips and commutes cancelled because of the lockdown. The premiums continue to be withheld by the insurers. Is this privilege of refund available only for rich air travellers and not for their poorer road cousins? The lockdown is akin to cancellation of road traffic. The IRDAI’s stoic silence isn’t helping the cause.

Buck the trend: The IRDAI has been admitted as a signatory to the International Association of Insurance Supervisors’s (IAIS) Multilateral Memorandum of Understanding (MMoU). The IAIS is a global framework for cooperation and information exchange between insurance regulators. Its deliberations on Covid-19 have highlighted the importance of effective policyholder protection and fair customer treatment at this difficult time, which includes extending premium rebates. Despite the best international practices and advisory, the IRDAI is unwilling to follow norms and turn a blind eye for reasons unknown.

The IRDAI is a powerful institution and it should regulate, with a degree of discretion, the insurers’ business ethics and practices. It cannot be seen to be giving little or no weight to the significance of policy-holders’ demands.

The IRDAI should extend motor premium adjustments to protect the interest of, and secure fair treatment to, millions of policy-holders; to set, promote, monitor and enforce high standards of integrity, fair dealing and competence of those it regulates; and take action where such standards are inadequate or ineffectively enforced.

A PIL has been filed in the Madras High Court and a notice has been issued to the IRDAI on a plea seeking adjustment of motor vehicle premiums.

The writer is an advocate at the Madras High Court and an insurance consultant. Views are personal

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Published on July 15, 2020
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