Financial Daily from THE HINDU group of publications
Friday, Dec 13, 2002

News
Features
Stocks
Port Info
Archives

Group Sites

Money & Banking - General Insurance


Insurers told to show `proof' of high losses in motor cover

Sarbajeet K. Sen

NEW DELHI, Dec. 12

INSURERS are under fresh pressure to come out in the open with all data available with them on motor tariff and the losses suffered by them on various segments of the motor portfolio to justify their claims on higher tariff rates. This time around, even the Tariff Advisory Committee (TAC) of the general insurance industry is understood to have sought greater transparency from the non-life insurance companies on this count.

The need for insurance companies to back their periodic demand for higher motor tariff with concrete figures came under discussion at the recent meeting of the Justice T.N.C. Rangarajan Committee looking into the feasibility of detariffing the own-damage segment of the motor insurance business. The committee had held its first meeting earlier this month.

According to sources, the TAC representatives at the meeting pointed out that insurers have shown continued reluctance to maintain a transparent approach on the loss ratios suffered by them in the motor business to back their claims for higher premium charges. The reluctance to provide the relevant data has been one of the major points of contention between insurers and transporters.

Sources said that the first meeting of the committee for detariffing otherwise went of expected lines with insurers strongly pitching for being allowed to fix premium rates based on their losses while transporters vehemently opposed the move.

Seeking to know how consumer interest would be protected by the regulator in a free market, transporters pointed out that going by past trends where insurers openly flouted IRDA's orders it would be asking for too much for the consumers interest to be kept in mind while fixing tariff rates in a deregulated market.

The exercise on detariffing of the motor business has been initiated by the Insurance Regulatory and Development Authority (IRDA) in the backdrop of persistent claims by the insurance companies that the present tariff regime does not enable them to cover the losses suffered in the motor business. Insurers say that motor losses on an average run up to nearly 300 per cent of the premium received thereby having a severe adverse impact on their bottom-line.

However, IRDA has made it clear that the detariffing exercise is to be restricted only to the own damage segment of the motor claims since taking out a third party liability policy is mandatory for vehicles owners under the law.

The Rangarajan Committee has wide representations from insurers (both public and private), TAC, government officials, transporters' bodies and surveyors. The panel has been asked by IRDA to submit its report by March 31, 2003.

The committee has tentatively fixed December 22 for holding its second meeting during which it is likely to prepare a first draft of a discussion paper on the subject. When given a final shape the discussion paper would be circulated widely for comments from all sections of the public.

Send this article to Friends by E-Mail
Comment on this article to BLFeedback@thehindu.co.in

Stories in this Section
Re loses overnight gains


Punjab National Bank hits new 52-week high
Corporation Bank to host home loan fair
Loan scheme from Birla Home Finance
Insurers told to show `proof' of high losses in motor cover
ICICI Bank unveils mobile ATMs
UTI Bank opens ATM in Coimbatore
Federal Bank plans own premises in Kozhikode
RBI asks lenders to take ownership rights of defaulting corporates
Safeguards sought for SSIs in Securitisation Bill
Delhi HC rejects Mardia Chem plea to block lenders
SIDBI plans to hive off micro-credit foundation
Corpn Bank's tie-up with LIC proving beneficial
Andhra Bank against NGOs turning financial intermediaries


The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line