Panel For Cut In 3rd-Party Premiums
The expert committee on motor insurance has recommended a cap of Rs 7.5 lakh on third-party property damage liability and has proposed a steep reduction in third-party premium. The panel said an unlimited liability cover can be made available but on payment of an additional premium.
The premium on private vehicles is proposed to be brought down to Rs 100 instead of the existing Rs 340 for cars with an engine capacity of up to 1,500 cc and Rs 509 for over 1,500 cc cars. On payment of an additional Rs 200, unlimited third party property damage (TPPD) liability cover would be made available.
The committee headed by former Insurance Regulatory and Development Authority member H Ansari, in its report submitted to the Tariff Advisory Committee, while looking at the claims experience of the motor portfolio for the past six-seven years, has said that the experience has been adverse due to the unlimited third party liability awards by the courts. "Elsewhere in the world, unlimited liability did not exist and perhaps the time has come that this issue be re-examined by the concerned authorities," the report said.
As part of the rationalisation plan the committee, said new and better maintained vehicles were subsidising the older and poorly maintained vehicles. Therefore, the concept of age-wise loading or additional premium has been proposed with a zero-load for private cars and two-wheelers up to 5 years, 5 per cent for 5-10 year old cars and 7.5 per cent for cars older than 10 years recommended.
Based on the claims experience, the committee was of the opinion that cars with engines above 1500 cc were likely to produce greater damage and warranted a higher loading.
It has therefore recommended that the existing differential rating for private cars and taxis not exceeding 1500 cc and exceeding 1500 cc be reworked. The new categorisation recommended classifies cars up to 1000 cc in one category, those between 1000 cc and 1500 cc in the second and above 1500 cc in the third with a loading of nil, 5 per cent and 10 per cent, respectively.
The panel has also mooted the introduction of insured's declared value (IDV) or the sum assured for the purpose of tariff instead of the insured's estimated value (IEV) and market value concepts which are contentious issues between the insurer and the insured.
IDV of a vehicle will be fixed at the commencement of each policy period and would include accessories that have not been fitted by the manufacturer. To calculate the IDV, the reinstatement value of the brand and model would be adjusted for depreciation.
For obsolete models, or models that have been phased out by manufacturers, the schedule of depreciation would be applied on the price at which the vehicle was bought initially depending upon the age of the vehicle.
Keeping in view the advent of fibre glass, the committee has recommended that depreciation for fibre glass components be introduced and would be pegged at 30 per cent.