26 Dec 2014
Mumbai: Insurance Regulatory and Development Authority (IRDA) has
revealed the fact that it is not considering scrapping the common
pool where vehicles that are denied insurance are covered.
A senior official said, “Dismantling the declined pool and
free-pricing have been the main requests from the industry but we
have some concerns as most of the commercial vehicle risk is
currently being underwritten by public sector insurers.”
The declined risk pool allows insurers to transfer risks they are
unwilling to have on their books to a pool administered by General
Insurance Corporation, India's only re-insurer. In 2011, the declined
pool replaced the third-party motor insurance pool, which was set up
in 2007 to stem losses that were bleeding general insurers. Motor
insurance in India consists of own damage cover and third-party
cover. While the former is a profitable portfolio, third-party
insurance, which is mandatory for every vehicle in India, is highly
unprofitable as the liability for insurers is unlimited and the
premium is fixed by the insurance regulator. Recently, TS Vijayan,
Chairman of IRDA also said that the regulator is not considering
de-tariffing the premiums and the maximum tariff that can be charged
will continue to be prescribed by the regulator.
The declined pool's size has shrunk to around Rs 200 crore from Rs
3, 500 crore in 2011 because public sector general insurance companies
have been underwriting commercial vehicle risk on their own books.