Third party motor business now mandatory for general insurers

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The insurance ordinance, which was promulgated recently, has made it mandatory for all general insurers except specialised ones to underwrite a certain percentage of insurance business as third party motor premium as required by the IRDA, reported PTI.

Third party motor business now mandatory for general insurers
The Insurance Regulatory Development Authority (IRDA) is likely to come up with its operational guidelines on the subject shortly.

"We are working to fix the percentage of total premium collection a general insurer must do with regard to the third party motor premium. We will soon publish operational guidelines for the sector, but I also feel that the existing third party declining pool may be considered as one of the methodologies for the same," IRDA member (Non-Life) M Ramaprasad told PTI.

Existing third party motor pool provides covers to certain segments of commercial vehicles which are loss making for general insurers and find it difficult to get cover from them.

General insurers feel that the new mandatory rule would help them increase their business from the motor insurance sector which comprises the largest portfolio of premium collection.

They have suggested that the risks of providing third party motor covers must be passed on to the declining pool, which came into being, nearly a couple of years ago.

"Well, the move will help us get more business under the motor insurance segment, since everyone owning vehicles would have to mandatorily get their vehicles insured under third party motor premium now onwards," ICICI Lombard Chief for Underwriting and Claims Sanjay Datta said.

"I also believe that consideration of declining pool under the segment will be a good move when the third party motor insurance is made mandatory. Insurers will be able to pass on the risk to the pool," he said.

Reliance General Insurance has more than three per cent share in the third party motor insurance business, which is above the regulatory requirement.

"Yet, I do feel that now that more vehicle owners will come under the fold of third party motor insurance which will increase its business under the segment," Reliance General Chief Executive Officer Rakesh Jain said.

Read more about: motor insurance
Story first published: Friday, January 2, 2015, 9:20 [IST]
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