If media reports are to be believed, non-life insurers have reduced discounts on commercial and private own-damage motor policy by as much as 20%, as third-party motor risk moves to 'declined pool'.
Recently, the sectoral regulator, Insurance Regulatory and Development Authority (IRDA) had replaced the 'third-party motor pool' with 'declined pool'. The 'declined pool' will have lower contribution from industry for the insurance cover at about Rs. 12 billion against over Rs. 60 billion earlier.
Further, the report said, ““Third-party motor risk, which earlier went to the third-party pool, will now put pressure on insurers and they will have to take the claim on their balance sheet. This will prompt insurers to emphasise on better underwriting and management of risk."
IRDA has increased premium on third-party motor rates by 10% this year after a huge increase of 68% last year. This move is in-line with IRDA's directive that third party motor premium will be revised annually using a formula which will be based on the inflation and claim experience.
Motor insurance policy includes two componentsâ€”'third-party liability' and 'own-damage covers'. According to the law, it is mandatory for a vehicle owner to buy third-party insurance, but own-damage portion is optional. Third-party cover comes into play when a vehicle owner has to settle claims of a third-party for any bodily injury or property damage caused in an accident involving the insured vehicle.