Insurers struggle to meet motor third party obligations set by Irdai

General insurance companies are struggling to meet the motor third party (TP) obligations set by the Insurance Regulatory and Development Authority (Irdai) due to lack of access to data on insured vehicles and lack of demand from customers.

 

“Most insurance companies are struggling to meet the new TP obligations. There is mounting pressure on insurers to meet these new norms. We are trying to deploy more people and resources to meet these targets,” said an executive of a private sector general insurer.

 

According to Irdai norms, general insurance companies with market share of up to 2 per cent in motor TP must increase the minimum percentage in motor TP insured vehicles by 12.5 per cent over the last financial year.

 

Similarly, those with 2 per cent to 5 per cent must increase it by 10 per cent.

 

Inusrers with 5 per cent to 10 per cent share in Motor TP segment must expand their insurance by 7.5 per cent over the last year. Those with more than 10 per cent should increase it by 5 per cent from the previous financial year.

 

According to the regulator, every insurer will underwrite a minimum of 5,000 goods, 5,000 passenger carrying vehicles and 1,000 tractors (miscellaneous segment) in the first financial year following notification of Regulations.

 

New India Assurance, United India Insurance, ICICI Lombard General Insurance, and Go Digit General Insurance are some major players in the segment.

 

A private sector general insurance chief executive officer (CEO) said, “Earlier, it was not very difficult. Companies that were underwriting motor business could write old or new vehicles. There was some formula given by the regulator and most of the companies were able to achieve that target. But this year, they have come up with a new formula. Vehicles with a break-in period of 30 days only will be counted. But, we are not able to get the contact details of the customer. Hence, it is becoming very difficult for us to achieve that target.”

 

According to the Motor Vehicles Act, 1988, TP insurance is mandatory, covering vehicle liabilities if a vehicle causes injury, disability or death. The insurance regulator has mandated insurers to underwrite a certain amount of vehicles to expand insurance coverage in the country. 

 

In 2024, the central government informed the Supreme Court that 40 per cent of vehicles on the roads are uninsured.

 

Pooja Yadav, chief product officer, Zuno General Insurance, said, “The industry is actively working towards meeting the Motor TP obligation, demonstrating collective commitment and progress. While the final numbers are expected to be released in April following compliance and submissions, this reflects the industry's dedication to fulfilling requirements.”