Concerned at the alleged rise in frauds related to third party motor insurance, the government may soon make identity proof mandatory for claimants seeking compensation.
Some insurance companies had alleged that in the absence of proper verification and strict conditions for giving compensation to the relatives of a road accident victim, some fraudulent people were coming forward as claimants and this had turned into a racket squeezing crores of rupees from the insurers.
“All petitions should be filed with some identification. They should be accompanied with the claimant's photograph, residence proof and bank account detail. This will give claims to people who are entitled,” said a company executive familiar with the issue.
Insurance companies said cases had come to their notice where a natural death was converted into accident to get claims and due to lack of adequate documentation same set of people were appearing as witness to the accidents in appeals before the courts.
Another problem of insurance companies is that there is no time limit for seeking compensation and the claims can be launched from anywhere, irrespective of the accident site.
A proposed Motor Vehicles Insurance Bill may stipulate claims have to be filed within three years of an accident. It may also propose the claim must be lodged either where the accident occurred or where the vehicle was registered.
To address the issue of rising losses in third party motor segment, the finance ministry has also asked general insurance companies to take necessary steps for negotiated settlement of such claims.
Private insurance companies, which usually shy away from third party motor insurance because of huge claim ratio, have also been asked to participate in the process.
The issue was raised in the meeting of general insurance companies with Finance Minister P Chidambaram recently. The companies had argued that they were making huge losses in the segment partly because of unlimited liability and cap on premiums and partly due to fraudulent claims.
The finance ministry has asked the insurance companies to indentify fraud-prone regions in the country with regard to third party motor claims and take necessary steps for addressing the issue. The companies will classify the nature of frauds and the data will be shared with the entire insurance sector.
Third party motor insurance, which protects the vehicle owner from any financial liability in case of death or injury to a third person in a road accident, is mandatory requirement for every vehicle in India.
Insurance companies paid out 45% more than the premium on account of claims under the third party motor pool last year.
While all other products have been de-tariffed, in case of third party motor insurance, the insurers are bound by law to settle the claims with no cap on liability.
