Insurance regulator IRDA today said it will take a view on scrapping the Third Party Motor Insurance Pool, used to settle claims of accident victims, after completing discussions with stakeholders.
"Considerable amount of interactions or discussion are to take place. Consultations have to take place. No time frame for that (scrapping third-party motor insurance pool)," IRDA Chairman J Hari Narayan told reporters here.
The private sector insurance players have been demanding abolition of the third party insurance pool, saying that the arrangement for sharing claims was denting their profits.
Claims from the Third Party (TP) Pool are settled according to the ratio of market share of an insurer. Since the four public sector companies dominate the motor insurance market, private players lose out and at many times have to settle claims on their own.
The general insurance industry is expected to incur losses to the tune of Rs 3,500 crore on account of motor insurance claims in the current fiscal.
Hari Narayan said the pool was created to strike balance between supply and demand when the motor insurance market was imbalanced.
"So the question now is whether going forward should we be recognising the fact that demand and supply are in balance or we should change the architecture for the betterment of the policy holders," he added.
IRDA has been asking insurance companies to manage their claim settlement process judiciously to avoid losses. Third-party insurance cover protects the vehicle owner from any financial liability in case of damage to life or property of a third person.
This insurance is mandatory and no vehicle can be taken out from a showroom without the third party insurance.
Replying to a query on IPO norms for insurance companies, Hari Narayan said the IRDA has already received suggestions for market regulator SEBI and could announce the guidelines anytime.
On concerns that 'single premium products' could harm the industry in the long run, he said the product has got both advantages and disadvantages.
"As long as the balance between the single premium product and multi-pay products are maintained they should be no concerns," he said, adding the IRDA does not have any plans to restrict the product.