New Delhi, Oct. 9: Insurance watchdog the Insurance Regulatory Development Authority (IRDA) has warned general insurers of stringent action if they breach norms by raising motor insurance premium by over 100 per cent.
Both public sector general insurance companies and private insurers have received a letter from IRDA chairman N. Rangachary saying, “The CEOs of all companies have already been requested to fall in line with the directives issued by the authority and tariff advisory committee. Any infringement will result in action taken against the insurers.”
The regulator has in the recent past received complaints of breaches in motor tariff charges by insurers, some of whom have been reportedly charging 300-400 per cent higher tariff as against a maximum permissible 100 per cent.
Rangachary said, “Breaches of tariff have been reaching IRDA and TAC. All these cases are being referred to the breach of tariff committee of TAC and it will take further action.”
In the recently revised new motor tariff structure released earlier this year, IRDA permitted the general insurers to increase premia by a maximum of 100 per cent in the first year depending on the performance of the insured.
It was further allowed to increase this by another 100 per cent in the second year in case motorists continue to perform badly. This, however, has to be done on a case by case basis and only after examining the individual claim profile of the insured vehicle.
Out of the total Rs 11,000 crore premium collected by general insurance companies, almost 38 per cent accrue from motor insurance. But the average claim ratio in motor insurance ranges between 150-250 per cent of the total business, which makes this an extremely high cost business.