Irda Moots Premium On Good Driving: Bad Ones To Pay More

Good motorists may end up paying less insurance premium on own damages and will not have to continue subsidising the bad drivers.

The Insurance Regulatory and Development Authority (IRDA) has decided to de-tariff motor insurance market, whereby insurance companies can demand differential premium based on the claims experience.

IRDA chief N Rangachary today stated that the insurance industry will move towards a de-tariff environment in the next three to four years, starting with the motor portfolio.

This is a major worry between customers and insurance companies, he pointed out. The industry has been crying that it is bleeding because of the want of differential pricing, on account of bad customers. By de-tariffing the market, IRDA is looking at a situation where the good customer gets awarded and punishment befalls on the bad motorist, he added.

 

Speaking on the occasion of the launch of a magazine, Insurance Watch, Rangachary stated that there is a need for literature on the industry. Further, he added that the regulator will also be shortly bringing out its own monthly magazine -- IRDA Journal.

Pointing out for the need to detariff the motor portfolio, Rangachary said it will start with own-damages cover. The compulsory portion -- third party property and third-party injury coverage however, will not be de-tariffed.

The Tariff Advisory Committee (TAC) will bring out a working paper for discussion on the same. TAC secretary K K Srinivasan said there could be a pool formed for insurancing the risks of the compulsory portion in order to help the market.

In a move towards rationalising the present tariff structure, and bring it more in line with that prevailing in the West, the IRDA together with the TAC went to the US on a 10-day study tour of the testing facilities of vehicles.

On the West and East Coast, global insurance companies together have set up necessary facilities to figure out the insurance premium that ought to be levied. A report on this will be brought out shortly by the TAC.

Today there is no reasonable assurance that the cars are roadworthy, said Rangachary. The intention is to set up similar facilities in the country wherein cars are bought and crashed to identify their weaknesses. Thereafter, the premium for the respective models will be set.

The regulator is also looking at the consolidation of the four insurance acts -- IRDA Act 1999, Insurance Act 1938, LIC Act 1956 and General Insurance Business Nationalisation Act 1972. The Law Commission is reviewing the existing legislative laws, trying to do away with any contradictions. This will help the IRDA impose penalty on thoise companies which fail to perform. "The section of penalty will be strengthened, and the Law Commission will shortly float a working paper for discussion of the same by the year end," he added.

On the 30 per cent cap on premium from riders, Rangachary said: "We are thinking that health insurance covers can be kept outside the 30 per cent cap. This is because no one is offering health insurance service today and this will help to develop the health insurance portfolio".