and I am sure the transporters association will understand that,Ē 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. ďIn 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 Ďthere could be errors and omissionsí,Ē 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 investment income of insurance companies is sizable. All premiums are collected by insurance companies in advance and the longer the delay in settling claims, the longer the money stays with the insurance companies.
In all other classes of P&C business where detariffing has taken place and pricing freedom given to insurance companies, the premiums have come down drastically, thanks to competition. There is thus a strong case from the policy holders perspective to detariff motor TP premiums. If this happens, the premiums are likely to come down drastically and benefit the motor policy holders.
Though externally, insurance companies are supporting detariffing of motor TP premium, there is a perception that behind this facade they are working for retention of the tariff where they get assured increases in premium rates by Irda instead of facing the prospects for drastic reduction in premium in a competitive detariffed environment, Srinivasan said.