Discounts on own-damage motor policies lowered down by 20%

MUMBAI: Non-life insurers have lowered discounts on commercial and private own-damage motor policy by as much as 20%, as third-party motor risk moves to "declined pool". Insurance regulator Irda recently formed the declined pool, replacing the third-party motor pool, which will have lower industry contribution for insurance cover at about Rs 1,200 crore against the nearly Rs 6,000 crore earlier.

"Discounts on motor own damage has come down after the regulator increased third-party premium rates," said Vijay Kumar, head - motor insurance, Bajaj Allianz General Insurance. "There has been some re-engineering and companies have reduced rates by up to 20%."

Third-party motor risk, which earlier went to the third-party pool, will now be borne by individual companies and they will have to take the claim on their balance sheet. This will prompt companies to emphasise on better underwriting and management of risk.

The regulator has increased premium on third-party motor rates by 10% this year after a sharp increase of 68% last year.

Motor insurance policy is essentially made up of two components - third-party liability and own-damage covers. While third-party is mandatory as per law, the 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.