Car care

New Delhi, Dec. 6: Tariff caps on motor insurance will be lifted from January 1 next year. However, tariffs on third-party motor insurance will continue to be regulated by the IRDA.

A motor insurance policy comprises own damage (OD) and third party (TP) liability.

According to a notification issued by the Insurance Regulatory Development Authority, own damages will be detariffed, or in other words, will see free pricing, from next year, while the third party premium will follow tariff guidelines.

The free pricing will raise the premiums for cars in a range of 33 per cent to 257 per cent.

“Insurers are advised to ensure that third party motor insurance is made available at all their underwriting branches and that requests for insurance are processed expeditiously and policies are issued promptly. The Authority will treat any complaint of non-availability of insurance or use of methods to put off the client seeking insurance, seriously”, said IRDA in its notification.

The regulator has benchmarked premium pricing for all categories of vehicles.

The notification also states that a new pool will be formed for setting claims arising from third party damages. General insurance companies will put there annual premiums collected from selling third party policies into this pool.

At present, tariffs of both own damage and third party component are fixed by the Tariff Advisory Committee. According to the guidelines, it is mandatory for an insured to cover himself against third party risk.

Insurance companies are unaffected by the regulator's decision.

Rakesh Kumar from ICICI Lombard, a private general insurance company, said, “Third party is mandated by the Motor Vehicles Act and therefore IRDA is deemed fit to fix a rating for this component. At least there has been a beginning of free pricing in the country. Depending on how the market matures, the regulator may in future decide to detariff the TP (third party) component as well.”

Speaking on similar lines, a senior official from IFFCO-TOKIO General Insurance said, “This will not take away any sheen from the excitement that was created in the market due to motor detariffication. Instead, good drivers will be rewarded”.

Broad sweep

The regulator has also fixed maximum commission rates to be paid to agencies and brokerage house in the new regime.

Terms, conditions and regulations applicable to fire, engineering, workmen’s compensation and other classes of business currently under tariffs would also be withdrawn effective from January 1, 2007, IRDA said in the circular.

In the detariffing regime, insurers would be barred from replacing the current policies with new ones just to alter the rates of premium.