Irda wants to continue with declined risk pool for third-party motor cover

MUMBAI: The Insurance Regulatory Development Authority of India is open to the idea of dismantling the declined risk pool for third-party motor cover, as demanded by general insurance companies, but will allow it to continue for some more time to gauge its impact, said chairman Hari Narayan.

"The main request made by the industry is to dismantle the declined risk pool and pricing mechanism and completely leave it to the market," said Irda chairman J Hari Narayan at an IBAI summit here.

"We have some concerns on that, because last time when it was dismantled there were hardly any sales."

The regulator said as only public sector companies offer third-party motor cover now - rarely any private insurer offers it -- the declined risk pool mechanism should be allowed to function for some more time so that its impact can be studied.

Because of the high third-party claim ratio, private sector companies try to avoid writing such policies. So, public sector companies get saddled with such policies that significantly erode their bottom lines.

The declined risk pool came into force in April last year, after the claim ratio on the earlier third-party motor insurance shot up to 213%.

The purpose of creating the pool, Irda said, was to ensure equitable and fair sharing by all insurers.

On allowing longer term health and motor policies, he said issues such as inflation and no-claim bonus needs to be looked upon.

The regulator is likely to come out with guidelines on bancassurance in the first week of February. The regulator is working on the guidelines on product design, bancassurance, micro insurance, reinsurance and health insurance, he said.