The new provision in the insurance ordinance making third-party motor cover mandatory has put major general insurers in a quandary as the move would increase their underwriting losses, prompting them to seek a hefty hike in premiums.
Following the ordinance, the insurance regulator, Insurance Regulatory and Development Authority of India (IRDAI) has clarified that each general insurer has to ensure that third-party cover is made available to the insured in proportion to its market share.
“General insurers have to do the third-party motor business mandatorily to the proportion of their market share. If one company has 10% market share, then this cover must also be in that proportion,” IRDAI chairman TS Vijayan recently told media in Mumbai.
For each general insurer, the third-party motor portfolio is a loss-making one as the claims exceed the premium they collect.