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| Commercial third-party motor pool ends |
| BS Reporter / Mumbai Dec 24, 2011, 00:46 IST |
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In what comes as relief to the non-life insurance industry, the Insurance Regulatory and Development Authority (Irda) has dismantled the commercial third-party motor pool. The regulator has now decided to form a 'declined' pool, effective April 1.
The move assumes importance, as it would free the pricing model and insurers would be able to price vehicles based on claims. Currently, premiums for third-party covers are decided by the regulator.
Under the declined pool, insurers would have the right to refuse or decline third-party insurance if it finds it too risky an asset to underwrite. This declined vehicle would then be given a cover by another insurer. However, the risk would be ceded or transferred to the declined pool. For the remaining vehicles, insurers would be free to underwrite risks independently. This means a deferential pricing system, based on claims, age, and frequency of accidents, would evolve.
To avoid 'cherry picking', insurers would be allowed to decline risks only on the basis of certain parameters like claims, the age of the vehicle, the type of the vehicle, geography, along with other parameters to be decided by the regulator from time to time. Also, based on the market share in the motor portfolio, every general insurer would have an obligation to underwrite a minimum standalone commercial third-party insurance cover. GIC Re would be the manager of the declined pool.
"The declined pool shall be extinguished at the end of every underwriting year, by transferring risks at par to members who have not fulfilled their mandatory obligations," Irda said.
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