Third-party risk pool on cards

The plan of setting up a pool for offering motor vehicle third-party risk cover, considered by the regulator a few months ago, is in the process of being finalised.

"The pool has to come in place to take care of the refused motor vehicle insurance proposals that require insurance coverage. Currently, actuaries are busy in the act of finding the correct price for the product that could be offered by the proposed pool," said B Chakrabarti, chairman and managing director, New India Assurance Company, on the sidelines of the insurance conclave 2006 on 'Transformation of Indian Insurance Industry-Post Liberalisation' organised by the Federation of Indian Chambers of Commerce and Industry (Ficci).

He added, "The ministry has proposed an amendment of the Motor Vehicle Act and once passed, it will help in the process." The final nitty-gritties were likely to be worked out within the next couple of months, Chakrabarti said.

Industry sources further confirmed that the creation of such a pool was expected shortly.

Meanwhile, de-tariffing, that is due on January 1, 2007, is likely to have a mixed impact on product price.

"Premium of health products for aged individuals could see an upward move whereas young customers could benefit from a lowering price. Tariff of property insurance products is expected to decline," said Chakrabarti.

M Ramadoss, chairman and managing director, Oriental Insurance Company Ltd (OICL) said that the post de-tariff scenario might result in a 30-35 per cent reduction in fire and engineering insurance rates and a 20-25 per cent decline in private motor car insurance.

On the other hand, the third-party commercial vehicle insurance rate might go up substantially, he warned.

Meanwhile, the company was looking at a growth rate of 10-15 per cent during the current year 2006-07 over the previous year's figure of Rs 3,600 crore. The company was also expecting to bag the account of Sahara airlines after its merger with Jet Airways.

Currently, OICL has Jet Airway's account with a premium income of Rs 70 crore. Sahara Airlines on the other hand pays a total premium of Rs 40 crore, he noted.