Third Party Motor Premium Rate Hike May Be Scaled Down

The sub-committee on motor insurance, scheduled to meet today at Mumbai, is likely to revise downwards the proposed hike in premium rates for third party cover. Its recommendations will be considered by the General Insurance Corporation (GIC) tariff advisory committee (TAC) in the afternoon.

But, GIC will not be able to enforce any decision on third party premium rates immediately as there is a stay order from the Calcutta High Court on the composition of the TAC itself.

The hike recommended earlier for this portfolio was to the extent of 325 per cent. The present thinking is that the hike may go up to 315 per cent. However, the sub-committee is likely to recommend concessions on premium rates of some classes of vehicles, notable among them are the taxis plying within city limits of Mumbai and Calcutta. These types of vehicles are found to be less prone to accidents, and therefore, third party claims on them are much less than others.

 

TAC sub-committee has come to certain conclusions after taking the underwriting experience of motor insurance on a five year basis. It has been found that against annual premium income of Rs 1,500 crore the claims go up to Rs 5,000 crore or the underwriters have to pay 300 per cent more than what they earn as premium under third party motor insurance scheme.

Since the standard management expenses are set at 20 per cent the TAC sub-committee thought it fit to recommend a premium hike of 325 per cent which GIC earlier tried to enforce and which had to be suspended because of country-wide transport strike.