Risk panel lays detailed own-damage de-tariffing

The S V Mony committee on motor 'own damage and detariffing' has recommended detariffing based on a system of rates, terms and conditions of individual insurers, with safeguards and internal and regulatory compliances.

"Recognising the merit of several significant underwriting factors that are in use almost universally, the group recommends the introduction of key underwriting factors to be adopted by insurance companies in preparing their respective rate schedules, clauses and conditions, discounts and loadings and treatment of exceptions. Factors such as make and model, engine power, age of vehicle, licensed carrying capacity, safety features, repair and replacement costs would now have to be considered," the report said.

With regards to driver or owner of the vehicle factors to be considered are age, driving experience, driving record, health and habits.

Other factors such as annual mileage run, geographical location, personal, commercial private, commercial for hire, type of goods transported would also have to be considered now by companies. The group, however, left it open to companies to provide the weightage to each of these factors for determination of tariff.

It was further recommended that new factors like theft-proneness of the vehicle or its parts, frequency and nature of accidents, famed driver, occupation of owner, traffic conviction record, special driving education, safety training, membership of Automobile Association should also be provided weightage for determination of premium, or any other factor they found fit to include.

The group also recommended that the existing tariff rates should be used as the guide rates. The group felt the creation of a band within which the insurers may apply the loading or discount, was best left to individual insurers.

"After careful consideration of the desirability of providing a sun-set clause to safeguard the existing accumulated benefits of customers with good experience, the group recommends that any dispensation in this regard is best left to companies' discretion," the report said.

"Similarly after a centralized tariff for 'own damage' is dismantled, the tariff provisions relating to scales of depreciation will no more apply but will be at the discretion of the insurance companies," the report said.

Only third-party insurance will, however, also have to be offered and cannot be refused by any company.

It has left on Irda to keep a tab on underwriting parameters, weightage, loading and discounts, assumptions of expenses, claims cost, profitability of the product and the portfolio in an agreed time frame arrived on by the companies.