Motorists set to face major third-party cover bill

Motorists might shortly need to cough up an additional hefty amount towards a one-time payment of third-party liability cover.

With over 60 per cent of vehicles owners neglecting to renew third party liability insurance cover after the first year of registration, the public sector insurance industry has recommended to the government to impose a one-time premium for a 15-year cover. The cost "" about 10 per cent of the value of the vehicle.

In other words, in addition to the one-time road tax motorist need to shell out on registration of their vehicles, if the government accepts the recommendation, this will be an added burden on car owners.

"We have made an recommendation to the government for a one-time premium for third-party liability insurance as most motorists only opt for the cover in the first year. With this move, the industry will get substantial premium as only 40 per cent of vehicles today are insured, said The New India Assurance Company chairman and managing director R Beri.

Still No. 1
The New India Assurance Company has topped the charts with a premium of Rs 4,028 crore in terms of domestic business and Rs 890 crore on foreign business for the year ending March 31, 2004.

This reflects a growth rate of about 2.5 per cent against the average industry growth rate of 12 per cent. The country's largest general insurance company attributed the intense competition and softening premiums as two key reasons for lower growth.

Beri said: "We have not lost business, but our shares have come down on account of the competition. We have however, not lost our leadership position." He cited the example of Reliance Industries, where The New India Assurance's share went down from 65 per cent last year to 45 per cent.

Meanwhile, the state insurer has bagged another large Reliance account for its cellular network, where it is the lead insurer with a 55 per cent share. "Our share of the premium is about Rs 4.5 crore," said Beri.

"Post September 11 with softening in premium rates and some of our major accounts faring better in terms of lower premiums have been reflected in our performance."

Indian Airlines' renewal for instance saw a dip in premium income by Rs 50 crore. Similarly, the Air India account was renewed at a significantly reduced premium, said Beri.

He further pointed out that in the non-tariff business, there has not been appreciable growth on account of the competition. "We are consolidating our position and looking at our bottomline as we exercise prudent underwriting," Beri added.