The regulator-mandated hike in third-party cover for cars is inadequate, general insurers have said as they fret over rising claims and higher losses.
Insurance for motor vehicles includes a mandatory cover for damage caused to a third party and an optional cover for damage to the vehicle.
The premium for third-party cover is determined by the Insurance Regulatory and Development Authority (IRDA) every year.
The regulator factors in the rise in the cost inflation index, average claims, frequency and expenses involved in servicing the motor third-party business while determining the rates.
For 2015-16, the hike in rates is in the range of 20-30 per cent for private cars and 14-20 per cent for two-wheelers.
“The actual hike in third-party motor insurance premium is not adequate. It may not be able to cover for the rising losses of insurance companies,” said M. Ravichandran, president (insurance) of Tata AIG General Insurance Company. He added that the insurers were hoping for a wider increase in the third-party rates. Losses of insurance companies on account of third-party claims stand at around 175 per cent and are growing on the back of rising claims.
In 2013-14, the total number of third-party liability death claims of over Rs 1 lakh stood at 38,461 and around Rs 2,343 crore was settled with an average ticket size of Rs 6 lakh for a claim.
“The number of vehicles are rising and at the same time population is also growing. This is adding to the number of claims and the ticket size of claims is also rising with increasing medical costs,” said Swaraj Krishnan, chief executive officer of Magma HDI General Insurance Company.
According to IRDA figures, net claims incurred on motor insurance had grown 6.8 per cent in 2013-14 over the previous year.
Insurance industry sources said the IRDA was always trying to strike a balance between increasing premium on one hand and the losses of insurers on the other.
To compound the problem of insurers, there is no defined limit on the compensation if an individual is injured or dies in an accident and the entire amount has to be borne by the insurance company.
Curated From : Car premium rates irk insurers