Irda rules out discontinuing motor pool

The Insurance Regulatory and Development Authority (Irda) has ruled out the possibility of discontinuing the year-old motor pool, christened 'Indian Motor Third Party Pool', as suggested by general insurance companies.

Speaking to the Business Standard, K N Bhandari, secretary general, General Insurance Council, said a few general insurance companies wanted Irda to reconsider its decision, but the regulator had overruled such a move.

It has been understood that in a letter to insurance companies, the regulator has expressed disappointment and surprise over their desire to discontinue the motor pool.

A senior general insurance company official said insurers feel the pool should be wound up as it has consistently incurred losses. The pool's claims management work is yet to start, and the insurers have been settling Motor TP (third party) claims pertaining to policies issued by them at their end.

Bhandari said that while the pool has so far collected premium of more than Rs 2,000 crore, the claims are 25 per cent higher than the premium collected. The pool is currently running on loss, which is likely to come down in the coming years, he added. Another official said that private companies now feel this portfolio can be handled by them and made into a profitable business stream.

Before the pool was created, the regulator did not allow insurance companies to reject proposals for third party liability under motor insurance. But insurers seemed to be avoiding this by not underwriting risks for Motor TP covers, hence legally rejecting it.

Since TP covers are considered to be loss-making portfolios, not many insurers encourage it. The brunt of motor insurance losses are felt mainly by state-owned general insurance companies since private insurers tie up deals with manufacturers directly.

Hence, Irda had come out with a solution for uninsured vehicle owners by creating a motor pool in the beginning of 2007-08. While the tariff would be set up by the regulator, all companies have to provide insurance cover to anybody wanting it, while the policy would be written to the pool account "" that is, the premium would go to the pool, out of which claim payouts would be made.