The Insurance Regulatory and Development Authority on Wednesday announced that it would lift pricing controls on motor insurance, along with other lines of business currently under tariff, with effect from January 1, 2007.
IRDA has instituted a mandatory pooling arrangement for the motor third-party insurance business to ensure that detariffing does not lead to chaos.
In a circular, IRDA chairman CS Rao directed all general insurers and the reinsurer to collectively participate in a pooling arrangement to share all motor third-party insurance business underwritten.
Motor insurance forms a big chunk (42 per cent) of the general insurance business and has been a loss-making portfolio for all general insurers. The other insurance businesses to be freed of tariff controls are fire, engineering, and workmen's compensation.
IRDA said the terms, conditions, clauses, warranties, policy and endorsement wordings applicable to all classes of business that would be detariffed, as well as marine hull insurance, which was detariffed over a year ago, would be the same as now till further orders.
The regulator said the rates of premium may vary, subject to compliance with the guidelines on "file and use" of general insurance products, which stipulate that all products have to be filed with the IRDA before their sale to customers.
For motor third-party liability cover, the IRDA has set a framework of premium rates effective from January 1, 2007. The annual premium for a private car of up to 1000 cc will be Rs 670, for 1,000-1,500 cc, Rs 800, and for over 1,500 cc cars it will be Rs 2,500.
The premium for public goods carrying vehicles with gross vehicle weight of up to 12,000 kg will be Rs 8,000 and for those of more than 12,000 kg, Rs 9,000.
IRDA said insurers should be mindful of concerns raised by vehicle owners about both the rates and availability of insurance. Considering the mandatory nature of motor third-party insurance, insurers should ensure that the cover was made available at all their underwriting branches and that requests for insurance were processed expeditiously and policies issued promptly.
It cautioned that any complaint of non-availability of insurance or use of methods to put off clients seeking motor insurance would be treated seriously. Further, insurers could not cancel existing insurance policies and issue fresh policies in lines of business being detariffed from January 1.
The insurance regulator said general insurers should ensure that proper underwriting standards were maintained even after the tariffs were withdrawn.
The General Insurance Corporation would be the administrator for the pooling arrangement, as it was for the terrorism cover pool.
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