Motor insurance premium set to rise from April

NEW DELHI: Motor insurance premium is set to jump by up to 20 per cent from April 2012, with the IRDA today deciding to scrap the common pool used by insurers to settle accident claims.

"The Authority hereby orders the dismantling of the existing Indian Motor Third Party Pool System with effect from March 31, 2012," an order by the Insurance Regulatory Development Authority (Irda) said.

"The general insurers who have issued the policy shall also be responsible for servicing them and settling the claims as and when they arise," it said.

The dismantling is being done as part of reforms in the Indian Motor Third Party Pool system, the regulator said.

According to analysts, the scrapping of the fund pool system will lead to rise in motor insurance premium.

"Pricing would go up for bad risk and the good risk would actually benefit from lower pricing. But overall I would expect the price to go up by 20 per cent in the long run," Bharti AXA General Insurance CEO Amarnath Ananthanarayanan said.

According to ICICI Lombard General Insurance MD & CEO Bhargav Dasgupta said, "Pricing of the pool is inadequate now. The dismantling will bring in more efficiency."

The pool was formed in early 2007 to ensure availability of third-party cover for commercial vehicles that had been refused third-party insurance.

Third-party insurance cover protects the vehicle owner from any financial liability in case of damage to life or property in an accident to the third person.

The major public and private sector insurance players have been demanding abolition of the third party insurance pool, saying that the arrangement for sharing claims was denting their profits.