Govt prepares draft on Kaul panel report, may table Bill in next Parliament session.
The Union government has initiated a process to hasten the de-linking of motor insurance from The Motor Vehicle Act, 1988, by enacting a new law on the subject. The Bill in this regard is expected to be introduced during the next session of Parliament.
According to sources, the ministry of finance has sought feedback from the industry on a draft it has prepared, based on the recommendations of a committee appointed for the purpose. A new Act has been a long-pending demand of insurance companies.
The draft, among other things, proposes a cap of Rs 10 lakh on third-party compensation or on the liability arising out of death or body injury caused to a third party by any vehicle on road. It also stipulates that claims have to be filed within three years of an accident. At present, there is no such limit and neither on the amount of compensation.
| NEW ROAD COVER PROPOSAL |
| * Maximum compensation to third party at Rs 10 lakh |
| * Time limit for filing claims set at 3 years |
| * Claim lodging where accident occurred or where vehicle registered. |
The panel report was given in December. It was chaired by R K Kaul, chairman and managing director of Oriental Insurance Company. On it were representatives from the General Insurance Council, Insurance Regulatory and Development Authority (Irda), the road transport and highways ministry and legal experts.
“The administrative control of law relating to road accident compensation and insurance of motorised vehicles shall now be with the ministry of finance. Hence, section 140 to section 176 of the M V Act, 1988, will be rechristened as The Motor Vehicles Insurance and Compensation Act and the same will be taken out of the existing Motor Vehicle Act, 1988,” the draft says.
It also proposes the claim must be lodged either where the accident occurred or where the vehicle was registered. Currently, claims can be launched from anywhere, irrespective of the accident site.
The ministry expects a separate Act would ensure lower capital requirement for the industry, as it would facilitate faster claims, low litigation, lower losses and a better claim ratio. The average third-party claim per accidental death is Rs 3 lakh. For injury, it is Rs 1 lakh. Though cases of high claims are few, in some cases these have gone up to Rs 20 lakh, depending on the profile of the affected person.
"There are various other changes to curb fraudulent practices and manipulations associated with claim filing.All these measures will lead to reduced losses, faster claim settlement and lower litigation in the sector," said an insurance company official.
The move comes when the general insurance industry is faced with a loss of Rs 10,000 crore in the current financial year, as Irda increased the provisioning requirement for the commercial third-party motor pool to 163-213 per cent from 153 per cent. Last year, too, the provisioning norms on these were increased from 135 to 153 per cent and the industry took a hit of Rs 10,250 crore.
The motor portfolio constitutes 43 per cent of total premiums but is plagued with high losses, particularly due to third-party claims. The claims ratio is estimated at 180-200 per cent, which means for every Rs 100 premium collected, the claims paid are Rs 185-200. Total premiums collected by general insurance companies were Rs 44,000 crore during 2010-11. Typically, third-party liability accounts for 35 per cent of total motor premiums.
