Insurance Regulatory and Development Authority (IRDA) recently brought out a proposal to include paint material in the list of items which have depreciation rates. These rates apply for replacement of parts for partial loss claims in respect of vehicles and accessories and is covered by the General Regulation (9) of the erswhile India Motor Tariff. It is applicable for motor insurance claims under own damage (OD) category in motor insurance segment.
In an exposure draft, IRDA said that different practices are being followed by general insurers as regard to the application of depreciation on painting. “The Authority has received representation from the General Insurance Council highlighting the need to recognise the depreciation aspect and also to have a uniform practice across the country and across all the non-life insurance companies,” said IRDA in the draft.
The authority said that paint will be included in the category of ‘rubber, nylon/plastic parts, tyres and tubes, batteries and air bags’ which presently attract 50 per cent depreciation. IRDA added that since paint material is polymer based and hence the depreciation applicable to plastic parts can be applied for it.
Therefore, it has been proposed that depreciation rate of 50 per cent for painting charges, would be applied on the material cost which shall be 35 per cent of total painting charges or the actual, whichever is lower. IRDA said that the net effect would be the maximum depreciation rate of 17.5 per cent being applied on the total painting charges.
The insurance regulator has proposed to the companies to make the above changes in individual package policy in the policy wordings. The stakeholders have been advised to give their suggestions on the draft to the regulator by 9 November.
