Irda suspends use of matrix for third-party motor risk cover

The Insurance Regulatory and Development Authority of India (Irda) has suspended the use of the matrix that formed the basis for charging higher premium on third-party motor insurance, finding that it was being misused by general insurers.

The regulator has asked general insurers to go back to the system that prevailed prior to June 2003, when the matrix (a table of loading on motor insurance) came into effect.

The general insurers have been asked to load third-party motor premium tariff by 100 per cent if the claims experience of any vehicle is adverse as per the insurer's assessment.

If the experience continues to be bad, then a further loading of 100 per cent on the expiring premium can be charged, beyond which further loading is not allowed.

Irda said the loading matrix has led to undesirable practices, which have resulted in its suspension with immediate effect.

A senior official of a leading private sector general insurer said third-party motor insurance has high claims ratio and in some companies, the loss ratio is as high as 300 per cent.

The regulator has also instructed insurance companies not to refuse third-party cover on motor vehicles.

It said the regional transport authorities, transporters and members of the insuring public has brought to its attention instances of refusal of third-party motor insurance cover by general insurance companies.

Irda said motor third-party insurance cover cannot be refused since it is a mandatory requirement under Section 146 of the Motor Vehicles Act, 1988.

It has been progressively receiving increasing number of complaints stating that insurers are either refusing third-party insurance cover (especially for commercial motor vehicles) or adopting dilatory tactics such as asking for a great deal of unrelated information or insisting on holding the documents relating to the vehicles for several days, aimed at making it difficult for the vehicle owner to get cover.

The regulator said it has been also been reported that besides the public sector insurers, the newly registered insurers are also refusing to entertain requests from commercial vehicle owners for motor third-party insurance.