The Hindu : Insurance staff seek hike in motor premium

Online edition of India's National Newspaper
Sunday, Mar 28, 2004

Andhra Pradesh

Andhra Pradesh

Insurance staff seek hike in motor premium

By Our Staff Reporter

KHAMMAM, MARCH 27. The All India Insurance Employees Association, Warangal division, on Saturday demanded an upward revision in the premium rates of motor insurance in proportion to the increase in volume of claims.

The district Joint Secretary of the association, M.S.R.A. Srihari, said revision of rates was necessary to save the general insurance companies, which were being heavily bled by the insurance system loaded heavily in favour of road accident victims.

He wanted the Motor Vehicles Act to be amended to have a limited structured compensation for accident victims. The Insurance Regulatory and Development Authority (IRDA) should fix a minimum percentage of motor insurance business as mandatory for all the insurance companies while regulating the business operations. Till now the Government regarded the public sector insurance companies as public utilities and not commercial entities.

The Motor Vehicle Act aims at giving all possible help to the victims of road accidents through an inability bias towards them. The general insurance companies find themselves at the receiving end while implementing third party insurance and hence they wish to do away with this. But the MV Act had made it compulsory for all general insurance companies to accept the portfolio of third party insurance.

The General Insurers (public sector) Association (GIPSA) had incurred a loss Rs. 1,200 crores in 2001-2002, and Rs. 1,420 crores in 2002-2003 on the portfolio. It is the major loss-making portfolio for general insurance.

Section 147 of the MV Act says the liability of the insurance towards TIP was unlimited whereas for property damages it was limited to Rs. 6000. Because of this factor, the insurance companies are made to carry the financial burden of the most irresponsible drivers. Cases involving the MV Act have become the bread and butter for many of the professionals associated with the process of investigation and settlements of claims. With such an orchestrated practice in place, the insurers are receiving a large number of spurious and fraudulent claims with fabricated documents in their support.

In certain cases pre-existing disability or injuries were also being shown as the consequence of road accidents. If the vehicle was sans insurance or the driver was not in possession of license, they were being replaced those that did.

The Supreme Court judgment in a recent case says that the insurance company cannot reject a claim even if the driver of the vehicle did not have a valid license. Private insurance companies are refusing to underwrite the motor insurance and the TPI. For 2002 -2003, motor insurance was in the range of 40 per cent of the total business for the public sector general insurance whereas for private companies it was minimal.

The IFFCO-Tokio, which accounted for the highest among the private companies had only 11.99 per cent of the total business whereas ICICI Lombard had a share of 1.3 per cent of the total business during 2002-2003. Mounting pressure from the public compelled the Government to write to IRDA to look into the charges that private companies were refusing to underwrite TPI. But the IRDA did not relent and on the other hand was all praise for the private companies.

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