Insurers press for higher third party insurance premia as losses mount

The insurance industry is looking at the issue of higher premia on the mandatory third-party insurance for trucks. A panel headed by M Ramaprasad, IRDA member (non-life) has been formed to look at the current pricing mechanism and suggest changes to stem losses.

According to the insurance sector regulator, IRDA life insurers are shying away from launching new ULIPs with focus only on the launch of traditional products. IRDA said that a majority of new products filed were traditional.

Of the 40-50 new products that life insurers have filed, the IRDA said, only about 10 products are unit-linked.

On an earlier occasion, when insurance companies raised rates by 150 per cent in 2007, the regulator was forced to reduce the hike to 70 per cent, after truckers went on a nationwide strike.

Although the 70 per cent hike gave some relief, insurers claim they have been bleeding as claims have risen and premiums have been constant. The panel will consider creation of a 'declined' pool for commercial vehicles, among other things.

A 'declined pool' is seen as a device to arrive at an easing the underwriting restrictions. If insurers were given choice to choose which vehicles to insure, some trucks would not be covered, although the cover is mandatory. To address this, many countries have the concept of declined pool where the unwanted applications are accepted and claims shared among all companies.