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Irda rejects demand to dismantle third party decline pool

Insurance Regulatory and Development Authority (Irda) does not intend to dismantle the third party decline pool despite private insurers asking for it, said chairman J Hari Narayan.

Insurance Regulatory and Development? Authority (Irda) does not intend to dismantle the third party decline pool despite private insurers asking for it, said chairman J Hari Narayan. According to one of their requests made to the finance ministry, the private non-life insurers want motor third party decline pool to be dismantled, Hari Narayan said, adding private players want these to be left to the open market.

?Last time when the decline pool was so dismantled, we saw there were hardly any claims paid by private insurance companies and all of it was made available by the public insurance companies, which is why the pool mechanism was constituted,? he told reporters on the sidelines of an event.

Hari Narayan believes the market should continue with the decline pool for some more time, since it was introduced only in April.

?We should allow it to run for a year or two and then take stock if the decline pool was helpful,? he said. Third party motor insurance mainly provides cover to people on the road, passengers who pay fares and those who don’t.

Recently, Irda came out with guidelines for implementation of declined risk pool system. As per the guidelines, the declined risk pool would apply to commercial vehicles for standalone third-party insurance liabilities.

Private non-life insurers try avoid writing these policies due to the high claim ratio in commercial vehicles segment. General insurance industry has been reeling under losses mainly due to bogus third-party motor claims and due to poor under writing standards.

Motor insurance contributes one third of the premium income for the non-life industry. As of September, the industry had earned R13,626 crore by selling motor policies.

Hari Narayan reiterated that banks associating with more than one insurance companies in a state under bancassurance would be fundamentally wrong. The banks would not continue being agents under bancassurance, since tying up with more insurers would make them brokers, according to Hari Narayan. However, the regulator has taken note of these requests from banks, which will be presented in front of the Insurance Advisory Council in the later part of January and final guidelines would be out in the first week of February, he said.

Hari Narayan said the finance ministry’s decision to raise the investment cap for Life Insurance Corporation (LIC) to 30% from the current 10%, was imprudent.

The finance ministry raised the investment cap after pointing out that the LIC Act, 1959, supersedes the Insurance Act, 1999. As per the LIC Act, 1959, the state-run life insurer could invest up to 30% of its total fun in a single entity. “When any subject matter of law is concerned, they do consult the concerned regulator. On this matter there has been no consultation yet,” he said.

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First published on: 05-01-2013 at 00:42 IST
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