Creation of motor pool has its own problems

Venkatachari Jagannathan
17 February 2006

Chennai: The Insurance Regulatory and Development Authority's (IRDA) proposal of creating a motor pool to provide insurance cover for vehicles will not be a smooth affair. According to industry experts several procedural issues have to be ironed out before the pool could come into effect.

For the uninitiated, motor insurance pool is one under which vehicles that are refused insurance at least by three insurers are provided insurance cover.

Most private insurers decline to insure commercial and old passenger vehicles on grounds of their high claims ratio. The four government insurers then grudgingly offer cover at a higher price.

Says Shrirang V Samant, chief executive officer, HDFC Chubb General Insurance Company Limited, "In the case of motor claims there are no limits, either on the time, jurisdiction or on the claim amount. However the insurers liability is limited by its share capital."

Under the proposed motor pool system, the rejected vehicles will be insured and the claims, if any, would be paid out of the pool fund created by premium receipts. The surplus or the deficit at the end of the year would be distributed amongst all the insurers in the proportion of their motor insurance portfolio.