Motor insurance may move to declined pool system
by admin on Nov.10, 2011, under Car insurance
If all goes well, the Insurance Regulatory and Development Authority (Irda) will make changes to the existing motor insurance regime and move towards what’s called a ‘declined pool’ system.
Under the current system, third-party insurance premia are maintained in the form of a pool and insurers access the pool funds to settle the claims. But with losses mounting in the pool, the regulator is forced to look at alternatives.
“The motor third-party pool was constituted at a time when the demand and supply of third-party insurance was imbalanced. Looking at experience since the constitution of the pool, these are now fairly balanced. The issue is now is about making changes to the architecture of the process for betterment of the policy holders to make it more efficient keeping in view the balance between demand and supply,” J Harinarayan, the Irda chairman, said.
According to him, the regulator is “looking at it de novo, at all aspects.”
Currently, third-party pool accepts all proposals for third-party liability of commercial vehicles and the member companies take their risk in proportion to the market share.
“We may move to a declined pool to give the same measure of benefit with considerable efficiency in operations. Considerable amount of discussions have to take place before it can come into being so there is no particular timeframe set for doing it,” he said.
Under the declined pool system, a general insurer will have the flexibility to underwrite some of the third-party commercial vehicle businesses independently and price the risk accordingly.
The vehicles denied insurance will come under the declined pool and the liabilities will be shared by all general insurance companies. At present, the general insurers follow a notified price system as far as the pool is concerned.
Though the regulator is also evaluating the issue of detariffing, Harinarayan said, “we will have to see and perhaps it is not yet the right time to do that.” The insurance regulator is also expecting the much-awaited go-ahead for the IPOs by the insurance companies shortly.
“The IPO norms have been finalised by the Securities and Exchange Board of India and they are now awaiting a notification in the gazette. I hope it will happen very soon,” he said.
Meanwhile, several joint venture proposals are awaiting the approval of the Irda for making forays into the insurance sector.
Harinarayan has confirmed that one such joint venture between Liberty and Videocon has been issued R1 (the first step towards allowing the company to enter the sector).
“We have recently issued the R1 for a joint venture between Liberty and Videocon. There are a few more such joint ventures (awaiting IRDA’s approval),” he said.
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