Mumbai : Insurance regulator Irdai said an increase in the third-party motor premium is inevitable next financial year to take care of the health of the service providers. Third-party motor premium is the only segment in the general insurance sector that’s still regulated.
In the recently released exposure draft on the topic, Irdai proposed a 50 per cent hike in the third-party motor premium, reports PTI. “We have already come up with an exposure draft on this for which we are seeking opinion from various stakeholders. Hike in the third-party motor premium is inevitable. The quantum of the increase depends on what feedback we receive from the stakeholders,” Irdai chairman TS Vijayan said at a FICCI event.
Backing a hike in the third-party motor premium, he said, “insurance is all about pooling and claim amount keeps varying. If there is a fixed compensation the premium is safe but that is not the case with third-party motor premium, therefore the need to increase the same.”
Whether the regulator will accept ITI Re’s demand that it should also get the obligatory cess falling on the lines of GIC Re, he answered in the affirmative.”Being a domestic reinsurer, ITI Re is eligible to enjoy obligatory cess. The only thing that the company will have to show its financial strength to become eligible for availing the facility,” Vijayan said. Obligatory cess is percentage of premium income that general insurers mandatorily pay to re-insurer. Currently this is 5 per cent, down from 20 per cent some years ago. ITI Re is the only the domestic applicant that has been given the final approval by Irdai to begin operations in the country. Along with it five foreign players also got the final approval to begin branch operations in the country.
