Provisioning for third-party pool may rise 200%

MUMBAI: Provisioning requirement for third-party motor pool is likely to burden non-life insurers as the independent body taking a view on the subject had suggested a 175-200% rise.

Since the claims are settled over the year, non-life insurers are required to maintain a particular level of reserve requirement for the third-party motor portfolio. Provision depends on the claims management and the pricing.

The independent body of the UK government has suggested the increase. Irda had constituted a committee, which had suggested certain increase. Later, the General Insurance Council had proposed that we take a third party or an independent view on the matter.

"According to actuarial estimates, the present increase is underestimated. So we need to see the actuarial suggestion given by the UK actuarial report," said Irda chairman J Hari Narayan at the sidelines of a CII conference.

General insurance industry has so far provided for lower provisioning to reduce their losses and to remain profitable. Insurers, on the other hand, believe there is a scope for a further increase in third party motor segment.