HC quashes IRDA order to hike third-party premium

MUMBAI: The Calcutta High Court, in an order on Monday, quashed a notification by the insurance regulator raising premium on motor vehicles for third-party cover.

The order pertained to a petition filed by Asansol Mini Bus Association and Federation of West Bengal Truck Operators Association, who had appealed against the increase in premium by the Insurance Regulatory and Development Authority ( IRDA) on the ground that they were not given a fair hearing.

It is not clear what implications the order will have on premium. IRDA is likely to go in for appeal. However, the court rejected the request to stay the order. Although IRDA has not provided any directions to general insurance companies, most of the insurers would have got a copy of the order as several are party to the suit.

The court said in its order, “Consequent upon the discussions and observations made hereinabove the impugned order is quashed and set aside. This order will not prevent the respondent authority from revising /increasing the premium rates for Motor Third Party Insurance Liability 2012-13 adhering to the directions given by the Hon’ble Supreme Court in the matter of Joint Council of Bus Syndicate (supra).”

The IRDA’s order dated March 27, 2012 resulted in third-party premium for twowheelers and cars going up by 15-20 %. Third-party premium forms a small portion of the premium paid by two-wheeler and car owners, but it is a sizeable amount for heavy vehicles.

Third-party premium refers to the mandatory cover that all vehicle owners need to buy to ensure that accident victims receive compensation from insurance companies. Although all premium rates have been decontrolled, third-party rates are still administered by the regulator because the cover is mandatory and insurance companies claim that the business is unprofitable for them. According to insurance officials , the motor third party premium was revised on the basis of a formula.