The Indian Insurance Industry hoped for a much better 2012 after a disastrous 2011 in which thousands of people were laid off and hundreds of offices closed. Lack of government reforms and tight regulation had resulted in losses and company exists. The new regulation by IRDA of doing away with a third party pool for disbursing insurance claims for the mandatory third party insurance for cars was hoped to be the beginning of good times. However the joy has been shortlived for the Indian Insurance Industry as the provisioning norms have been increased to 213 percent from 183 percent. What this means is the the car insurance providers will have to set aside more money from third party claims which will result in higher losses.
This is the same as when RBI increases the CRR for Indian banks which results in lower profits for them. Car and Truck premiums account for 43% of the premiums and are a big loss marking area. The claim ratio is estimated at 153 per cent. That means for every Rs 100 premium collected, the claims paid are Rs 153.
Read on how to buy the Best Car Insurance in India.
All the 24 general insurers in the country are staring at a loss of Rs 10,000 crore (Rs 100 billion) in the current financial year as Irda is set to increase the provisioning norms for the commercial third-party motor pool to 163-213 per cent from present 153 per cent.
The provisioning will be 213 per cent for the current year, 183 per cent for 2010-11 and 163 per cent for 2009-10.Provisioning for the year 2008-09 will be 153 per cent.”An increase of one per cent in provisioning means an additional capital or loss of around Rs 100-150 crore (Rs 1-1.5 billion).Last month, Irda decided to do away with the existing commercial third-party motor pool and said it would be dismantled on a clean-cut basis.
Pros of Third Party Car Insurance
1) The owner of the vehicle is rest assured that damages that come under the purview of the third party liability cover is paid by the insurer in case of some untoward incident.
2) In case of bodily injury or death of a third party or a passenger of a public service vehicle the amount paid is the amount incurred (without limit)
3) If there is damage to any property of the third party a limit of Rs 6000 is paid.
4) It also covers the personal accident of owner
Cons of Third Party Car Insurance
Though the primary of objective of the getting the vehicle insured with a third party cover is met, yet obtaining only a third party liability has its own limitations
1) This doesn’t cover the damages of the car and the accessories
2) It doesn’t cover the losses out of burglaries, theft or situations like riots, environmental calamities like earthquake, hurricanes, storms, floods etc.