The working group said that there is a need to improve motor insurance penetration since 58% vehicles are running on the road without the mandatory motor third party cover.
A working group set up by the Insurance Regulatory and Development Authority (IRDAI) has suggested that the motor third-party (TP) obligation of general insurance companies should be linked to the number of uninsured vehicles in the country.
Each non-life insurer is mandated to write a certain amount of motor TP business every year depending on their gross domestic premium income and market share. Motor TP cover is mandatory for every vehicle running on Indian roads.
The change in formula will mean that insurers will be mandated to write additional business to get uninsured vehicles with the fold of the motor third-party cover.
So, if you are someone who has not renewed their car/bike insurance, you may soon be approached to buy the mandatory motor third party cover.
The premium is decided by IRDAI and this insurance protects the vehicle owner from financial liability of third-party incidents like accidental death or disability caused by the vehicle.
The insurance regulator has given time till May 8 to all stakeholders to give their views on this report. After this, the regulator will come out with the necessary guidelines on the mandatory motor TP business to be written each year.
The working group has said that motor TP obligation for each insurer would be arrived at for each category of vehicle, including two-wheelers, private cars and others. This obligation is presented in the number of policies in each category. Higher is the level of uninsured vehicle, higher will be the obligation. Depending on their market share, each insurer would be required to write a share of the business.
For example, if 20 million policies are to be sold in motor TP for cars and 50 million, a large insurer with say 15 percent market share will be required to write higher business than a smaller insurer.
Here, the working group has suggested that IRDAI would also bring out an ‘insurance factor’ every year for each category of vehicle based on its share in the number of uninsured vehicles in the country.
India is one of the largest auto markets in the world with nearly 20 million vehicles sold annually. The working group said that simultaneously, it is also one of the leading countries in terms of road accidents and the fatalities arising from it.
A report published by the Insurance Information Bureau of India said that out of around 220 million vehicles plying on the road in India as on March 31, 2019, the percentage of uninsured vehicles is at nearly 58 percent. The percentage of vehicles which do not renew their insurance after the first year is menacingly high at 52 percent on an average.First Anniversary Offer: Subscribe to Moneycontrol PRO’s annual plan for ₹1/- per day for the first year and claim exclusive benefits worth ₹20,000. Coupon code: PRO365
