With 54 per cent of motor vehicles without insurance papers, regulator IRDAI has proposed every general insurance company would be required to underwrite at least a 20 per cent increase in total number of goods-carrying and passenger-carrying vehicles on an annual basis or 10,000 vehicles in each category, whichever is higher.
Moreover, every new insurer will underwrite a minimum of 10,000 goods-carrying and 10,000 passenger-carrying vehicles in the first financial year of its operations. The first financial year is the year in which the regulations become operational.
This is part of the proposed Exposure Draft on IRDAI (Rural, Social Sector and Motor Third Party Obligations) Regulations, 2024, on which stakeholder comments have been sought by February 27, 2024.
Every motor vehicle is mandatorily required to be insured for third-party liability, while the own damage cover is optional. Union minister of state for finance Bhagwat Karad had stated in Parliament that of the estimated vehicle fleet of 30.48 crore (excluding data from MP, AP and Lakhswadeep), 16.54 crore vehicles were without insurance.
“With regard to motor third party insurance, the obligations are specified for goods carrying and passenger carrying vehicles as nearly 50 per cent of the vehicles in these two categories are uninsured. They are important segments of the motor insurance business and are exposed to third-party liability,” IRDAI said in its notice on the exposure draft.
According to insurance industry officials, there is both reluctance, particularly among commercial vehicle owners to renew their third-party liability policies and concerns over losses in motor third-party insurance.
“While the general insurance business has been detariffed, motor third party liability insurance premium is still regulated. The basic problem here is premium is limited but liability is unlimited resulting in losses. The industry will place their comments with the regulator on the draft exposure in the prescribed time,” a senior executive of a general insurance company said.
