Motor Insurance To Be Detariffed By April 2004

The Insurance Regulatory and Development Authority (Irda) today said it proposes to free the motor insurance business from tariff restrictions by April 2004.

Speaking at the fifth conference of Actuaries here, Irda chairman N Rangachary said the committee looking into detariffication of the own damage component of motor vehicles insurance is expected to submit its report before the March 31 deadline.

He said the report will be followed by consultations with various players concerned and the business is expected to be detariffied by April next year.

He added that, like life insurance companies, general insurers would also be required to mandatorily appoint actuaries by April 2006. At present general insurance companies can do with consulting actuaries alone.

Rangachary said that by 2006 the number of actuaries will increase and there will be no shortage of these professionals who play a key role in analysing the risk perception based on claims experience while setting premiums.

The Irda chairman said the risk-based capital system was the most appropriate prescription for India and the regulator had earlier thought of putting in place the system by April next year. He called upon actuaries to shift to the system by April 2005.

Rangachary told reporters on the sidelines that he had written to Vijay Kelkar, advisor to finance minister Jaswant Singh, outlining the merits of putting in place a system of pensions for the unorganised sector and had suggested that the government announce it in the budget.

The Irda chairman has also asked the government to implement the recommendations of the Eradi committee which had proposed a new system for taxation of life insurance companies.

In addition, Irda has proposed an exemption on the contribution made by general insurance companies to the proposed catastrophe reserve to pay claims arising out of a catastrophe.

Rangachary also said that there was a need to develop long term government papers to meet the needs of insurance companies which deal with long term funds and need to invest them for a longer time horizon.

He said that he has also proposed that the Centre can come up with tax-saving bonds long-term 30-year bonds exclusively for pension funds.