 "IRDA norms to reduce losses of car insurers")
Mumbai: Insurance sector regulator IRDA’s decision to implement ‘declined risk pool system’ for third party motor insurance is likely to reduce the losses incurred in this space, officials of various general insurance companies said.
“With declined risk pool system, companies would be better placed to manage the risks of their motor policy accounts. So, the loss incurred in the commercial vehicle third party space should come down,” said chief financial officer of ICICI Lombard, Gopal Balachandran in Mumbai.[caption id=“attachment_254139” align=“alignleft” width=“380” caption=“Minimising loss. Andrew Middleton/Flickr”]  [/caption]
He also said that though loss ratio in the commercial vehicle insurance space should reduce in the future, the quantum of decrease would depend on the price correction expected in the next fiscal in the motor insurance premium.
Declined motor pool is the arrangement in which insurers would have the right to refuse or decline a vehicle insurance and these vehicles will be insured from the pool shared by insurers.
Presently all commercial third party premium are pooled and losses on account of the commercial third party motor portfolio are shared among all general insurance players according to market share.
Currently, the loss ratio stands at 145 percent in the motor insurance space or companies incur a loss of Rs 45 for every Rs 100 premium earned in a policy.
On Thursday, IRDA came up with guidelines for implementation of declined risk pool system, in which it said that this system would only be applicable to standalone third-party liability insurance.
As per the notification, no comprehensive motor insurance policy can be settled from the pool, which will reduce the overall corpus of the third party pool.
Referring to third party pool corpus, Balachandran said that it should be reduced to 25 percent in the next fiscal from its present size of around Rs 6,000 crore.
Other industry officials also echoed similar sentiment.
“We hope that losses incurred in the motor insurance space by general insurance companies will be reduced due to declined risk pool system with prudent underwriting practices,” managing director and chief executive officer of Bharti AXA General Insurance, Amarnath Ananthanarayanan said adding it would help in better claim settlements in motor insurance space.
According to the regulator, the insurance companies would now need to retain 20 percent of the gross premium in their accounts, give 10 percent to General Insurance Corporation of India and rest 70 percent would go to the motor pool.
Referring to this new system, chief executive officer of L&T General Insurance, Joydeep Roy said declined pool is likely to reduce the loss ratio and bring more transparency into the system.
PTI
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