About 70% of 2 wheelers and 35% of 4 wheelers are uninsured in India..!.
To plug the problem of a large number of vehicles running without cover, the Insurance Regulatory Development Authority (IRDA) is pitching to make motor 3rd party insurance policies valid for two (2) years, from the existing one-year term.
With 3rd party motor insurance a hugely bleeding portfolio, general insurers should welcome the move. It is a win for customers, too, as long-term policies could be priced lower, with insurers factoring in the no-claims discount, and also relieve them from the burden of the annual renewal.
A CEO of a public sector general insurance company said, “We have been asking the regulator to allow longer term policies, particularly for motor vehicles, for a while now. The regulator had some concerns regarding annual increase in premium, accounting treatment & creation of premium reserves for such policies. So, IRDA said it make a beginning with a two-year motor third party policy”
IRDA is working on a draft 2 year motor policy.
Motor insurance covers one’s own and 3rd party damage to property or / life.
Vehicle owners have the option of choosing between a standalone (3rd party) and a comprehensive cover.
Though it is mandatory for vehicles to have an insurance cover, it is estimated that about 70% of 2 -wheelers and 35% of 4 wheelers are uninsured.
Mr. K.G. Krishnamoorthy Rao, MD and CEO of Future Generali, said, ''There is a 40% drop in renewal of motor insurance policies in the second year for 2 wheelers, while for 3 wheelers it would be about 20%. This poses a huge structural problem for insurers.
General insurance companies, which are bound to settle motor 3rd party insurance claims with no cap on liability, paid out 75% more than the premium they collected on account of claims under the 3rd party motor pool last year.
The annual liability on account of 3rd party motor insurance is about Rs.10,000 crore for the general insurance industry.
Mr. Sanjay Datta, Chief of Underwriting and Claims, ICICI Lombard General Insurance, said ''The policy renewal at longer intervals would help insurers cut losses as it would ensure that customers do not let their policies lapse, particularly in the 2 wheelers segment where the amount is low and renewals are poor"
Covered by Motor Insurance In India..!
Type Number of Policies *
Two Wheelers 250.9
Private Cars 101.0
Goods Carriers 36.2
4 Wheelers - Taxis 11.4
Three Wheelers 3.5
(* Number of Policies in Lakh)
High Claims Payout - as per centage of Premium paid..!
year Claims Payout
2006-07 84.6%
2007-08 92.3%
2008-09 88.8%
2009-10 84.5%
2010-11 102.6%
2011-12 94.9%
Src: Hindu
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