Motor insurance rejig sees bonus fall sharply

the motor insurance policy is being simplified and prices rationalised to reduce the no-claim bonus/discount and integrate the claims history of the policy-holder into the entire pricing structure. there will be a sharp reduction in the no-claim bonus/discount. at present, it starts with 20 per cent in the first year and goes up to 65 per cent in the fifth year. this topmost ceiling will be brought down to 30 per cent. the new policy will also take away certain discounts that are extended by the four general insurance companies. a cap of rs 7.5 lakh will be put on the third party liability. this revised pricing structure has been worked out by a committee appointed by the tariff advisory committee and headed by former irda member h ansari. the committee is likely to meet for the last time in mid-december to sign the report. the report will then be presented to n rangachary, who heads the tac apart from the irda. rangachary will, in turn, get it ratified in the next board meeting of the tac. the new rating structure will be more scientific and intends to give benefit to policyholder for incorporating anti-theft devices in the vehicle. the benefits to the policyholder will be in the range of 0.5 per cent to 1.0 per cent of the sum assured. the new motor policy further plans to fix the liability of the insurer with respect to the unauthorized person traveling in the vehicle and unauthorized driving licences being used by the drivers of public transport vehicles. further, the vehicle categories will be much more elaborate giving benefits to the policyholder for all his precautionary efforts. another change envisaged is to do away with the present system of differential tariffs for the four zones into which the country has been divided, with the western zone getting the lowest premia on the ground of having the lowest claim rate. there will be no zone-wise demarcation. in the case of claims settled with reference to courts, the rate of interest payable by the insurance company will be based on the bank rate. earlier, the interest rates would depend on the courts award that would range up to a high of 18 per cent. this is quite relevant in a falling interest rate regime and would bring respite to the general insurance companies. a cap of rs 7.5 lakh is replacing unlimited liability as it has resulted in the bleeding of all the four general insurance companies. the claim ratio in the case of tpl has been in the range of 220 to 250 per cent. in fact, all other modes of transport have a cap on passenger and third party liability. in case of air travel it is rs 5 lakh and that for rail is rs 4 lakh. a claimant not satisfied with the sum awarded as compensation will have to file a civil suit instead of going to a tribunal as of now.

Motor insurance rejig sees bonus fall sharply

<img src=/photo.cms?msid=-328506930 align=left border=1>THE MOTOR insurance policy is being simplified and rationalised to reduce the no-claim discount and integrate the claims history of the policy-holder into the pricing structure.

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