November 13, 2014
General insurers are seeking a maximum limit of INR1 million (US$16,263) on motor third-party liability claims arising from road accidents.
For vehicle owners who want additional cover, an option for additional liability limit cover has been proposed. This additional cover will be for over and above the basic INR1-million policy.
In their feedback to the government on the issue, the insurers backed their call for a ceiling on third-party liability claims by citing high losses arising from such cover. The losses are estimated as exceeding INR120 billion, reported Hindu Business Line.
Mr R Chandrasekaran, Secretary General of the General Insurance Council which represents non-life insurers, said that the Council has submitted its recommendations to the government in connection with proposed amendments to the Motor Vehicles Act.
At present, the liability amount is decided by the courts and can be unlimited. In case of road accidents, compensation as high as INR200-250 million have been awarded.
Insurers feel that a liability cap will help insurers not only in bringing down huge losses, but also in lowering third-party motor insurance rates. Third-party motor insurance rates have been rising annually at the rate of almost 25%.
“A cap on liability will ensure that insurers can estimate the losses and look at appropriate pricing of policies. This is currently difficult to ascertain due to the unlimited liability,” said Mr Vijay Kumar, chief technical officer (motor insurance)at Bajaj Allianz General Insurance.
Third-party coverage is mandatory by law for both commercial and personal vehicles, and the insurance premium in this segment is decided by the Insurance Regulatory and Development Authority.