March 10, 2017 2:27:15 am
The Insurance Regulatory and Development Authority of India (IRDAI) has indicated that motor third party insurance premiums are set to rise in the next financial year. IRDAI had last week come out with the exposure draft which proposed a 16-50 per cent hike in premiums in various motor segments like two-wheelers and private cars from April 1. While consumers are not happy with a hike in premium rates for third party insurance, the insurance regulator believes that a rise in premium is inevitable.
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IRDAI chairman T S Vijayan said: “We have started receiving comments from various people, but there are some customers who are not happy with the hike in premiums. However looking at the reality of the business, a hike in rates is inevitable. Insurance is all about pooling and settlement of risks. The problem with motor third party is that claims amounts keep on varying… it’s not fixed. So premium has to undergo a change.”
Third-party motor premium is the only segment in the general insurance sector that’s still regulated. There is no proposal in the IRDAI exposure draft to increase the third party motor insurance premium for small cars (up to 1,000 cc) from Rs 2,055 currently. The hike proposed in mid-segment cars (1,000-1500 cc) as well as bigger cars and SUVs is 50 per cent. The proposal is to increase premium to Rs 3,355 for cars up to 1,000 cc and Rs 9,246 for bigger ones.
It has not proposed any change for two-wheelers having engine capacity up to 75 cc. However, for sports bikes and super bikes (more than 350 cc), it has proposed to increase the premium to Rs 1,194 from the present Rs 796, up 50 per cent.
He also emphasised on need to have innovative products in the insurance industry that will help investors with lower premiums. “Traditionally insurance has been sold by a person and serviced by a person, and for all this an expense is involved. When the technology happens, premium would come down as variations would be possible,” Vijayan said at the Ficci annual insurance conference.
Whether the regulator will accept ITI Re’s demand that it should also get the obligatory cess falling on the lines of GIC Re, he answered in the affirmative. “Being a domestic reinsurer, ITI Re is eligible to enjoy obligatory cess. The only thing that the company will have to show its financial strength to become eligible for availing the facility,” Vijayan said.
Obligatory cess is percentage of premium income that general insurers mandatorily pay to GIC. Currently this is 5 per cent, down from 20 per cent some years ago. Currently the state-run GIC Re is the reinsurer in the country and industry pays this obligatory cess. ITI Re is the only the domestic applicant that has been given the final approval by IRDAI to begin operations in the country. Five foreign players also got the final approval to begin branch operations in the country.
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