State Insurers Stop Full Cover For CVs

State-run general insurance companies have stopped providing comprehensive insurance cover to commercial vehicles (CVs) over seven years old following a burgeoning loss ratio. The loss ratio has been pegged at 200-300 per cent for different companies.

A circular was issued by the companies in February directing branch and divisional offices here to stop accepting comprehensive insurance policies for such vehicles this year. The decision was taken at the regional office level of the companies and hence is restricted to their respective jurisdiction areas, it is learnt.

According to this circular, commercial vehicles over seven years old will be insured only for liability, that is, third-party liability. Comprehensive insurance policy covered third-party liability as also damages suffered to vehicles. The insurance cost was felt to be too high in case of motor vehicles.

According to M T Ramteke, divisional manager, National Insurance Company, the company has not stopped insuring old commercial vehicles but has changed the mode of accepting premiums. These will henceforth be accepted only at liability, he said.

An official of United Insurance Company said that comprehensive cover is being "discouraged". A senior official of New India Assurance too said that they were discouraging comprehensive cover to vehicles but the decision has been left to the discretion of field officers.

The insurance companies suffered losses on account of third-party cover as also damages to vehicles. It was found that taxies carried more passengers than prescribed. In case of accidents causing death or injury, the companies had to bear the liability of all the passengers, even if they were more than the number prescribed.

The insurers obviously made huge losses as they had to shell out more than provided for. It is due to this reason that the companies are also discouraging third-party cover and have curtailed commission to agents. The companies also found frauds while claiming damage cover.

Besides the fact that vehicle owners deliberately crashed their old vehicles to claim insurance, the companies found that even in genuine cases, it was not profitable to provide insurance.

This was because the cost of repairs and auto parts has shot up and was not commensurate to the cost of insurance, sources said. But while the nationalised companies are giving at least third-party cover, private sector players had totally decided against insuring motor vehicles.