sharply increased the provisioning (the money general insurance companies need to set aside to meet the high level of claims) to 210 per cent of the claims from 145 per cent, based on the loss estimates by an actuarial committee. The requirement of 210 per cent reserve itself is very conservative considering the hikes in TP premium in the earlier years. “Today we (the industry) have the figures to justify the premium increase. Ever since the motor pool was launched, the industry has been building an extensive database. Based on the data, we are asking for an increase in rates and I am sure the transporters association will understand that,” said Srinivasan of New India.
The regulator has been considering detariffing the motor third party insurance segment which, some experts feel, will enable customers to choose market driven premium rates and the insurer of his choice based on the price and other considerations. At the same time, the regulator can impose a ceiling on the premium rates so that the customer gets the mandatory cover at a reasonable price.
However, industry veterans say that the proposed hike is unfair. “In the case of private cars up to 1,000 cc, the increase is 137 per cent and for motor cycles of 100-150 cc, the jump is 50 per cent. But there is an irony. The hike is based on the data of Indian Information Bureau (IIB) which admits in its disclaimer that it has not validated the data and has uploaded the figures as validated by the insurance company concerned. It also admitted that ‘there could be errors and omissions’,” said an industry source.
According to former Irda member KK Srinivasan, the insurance regulator should give up fixing motor TP premium, giving assured premium increases to insurance companies at regular interval. The methodology used to fix the premium is faulty, unfair and one sided. While all the debits namely claims, fixed costs and variable costs, have been taken into account, the credit accruing to policy holders on the income from investment of insurance companies from the premium have not been reckoned at all. The