March 23, 2015
The Indian insurance regulator has proposed that no insurer can refuse to underwrite third party insurance.
The insurance Bill was approved by the upper house of Parliament or the Rajya Sabha last night, after a heated debate and a walkout by some opposition lawmakers. The Congress Party and some other opposition parties backed Mr Modi’s National Democratic Alliance in voting for the Bill which was passed by the lower house or the Lok Sabha on 4 March. The Bill, which had been pending since 2008, needed to be approved by both houses. It will be signed into law by President Pranab Mukherjee. .
The exposure draft said that every insurer during a financial year should underwrite a minimum percentage of 90% of the overall motor third-party insurance premium of the industry for the immediate preceding financial year, reported The Hindu newspaper. “The minimum percentage so decided should be equal to the simple average of the insurer’s share in total gross premium of the industry and in total motor insurance premium of the industry, both in the immediate preceding financial year,” the draft said. Insurers are expected to submit their response to the exposure draft by 25 March. .
Crackdown on insurance evasion .
Meanwhile, the Indian authorities plan to crack down on evasion of mandatory motor third-party insurance. “Our study showed that about 55% of all registered vehicles in the country have no insurance. We are rolling out an automatic detection system in association with the police and road transport authorities in different states shortly,’’ Mr R Raghavan, Chief Executive Officer of Insurance Information Bureau of India (IIB), said. .
There are about 125 million vehicles in the country. While all vehicle owners will automatically buy vehicle insurance when they register their vehicles, only 45 % them renew their policies after a year, he said. The crackdown could lead to motor third-party insurance premiums rising by INR70 billion (US$1.12 billion) a year. “This will definitely bring down existing vehicle insurance premiums significantly due to economies of scale,’’ Mr Raghavan added.