With effect from 1st January, 2007, tariffs were withdrawn from the non-life insurance market. However, keeping in mind the mandatory nature of the third party business, the Authority decided to regulate the premium rates in the said segment effective 1st January, 2007 vide circular no. 034/IRDA/Detariff/Dec-06 dated 4th December, 2006, which was later modified vide circular no. 043/IRDA/Detariff/Jan-07 dated 23rd January, 2007.
To redress grievances of non-availability of motor third party insurance, especially commercial vehicles, IRDA in consultation with the Committee constituted under section 110G of the Insurance Act,1938 issued Directions under section 34 of Insurance Act, 1938 vide circular no. 035/Motor-TP/Dec-06 dated 4th December, 2006 constituting the Indian Motor Third Party Insurance Pool (IMTPIP).
The Pool came into operation from 1st April, 2007 exclusively for commercial vehicles. All insurers registered to carry on non-life insurance business including motor business are automatically required to participate in the pooling arrangement to provide cover at rates notified by IRDA.
Pooling of business, under the mechanism is achieved through a multilateral reinsurance arrangement between the underwriting insurer and all other registered non-life insurers and reinsurers.
The IMTPIP pooled a total premium of Rs.3,160 crore towards 87.68 lakh policies issued during the period March 2009 – February 2010. The incurred claims of the pool for the same period was Rs.3,791 crore, resulting in an operating loss of Rs.674 crore.
As against this, the premium during March 2008 February 2009 was Rs.2,823 crore with incurred claims of Rs.3,259 crore and net operating loss of `650 crore. I.4.4.6 The pool completed three full years of operation in 2009-10. The Authority has from time to time been receiving representations from non-life insurance companies who are members of the motor third party commercial vehicles pool that the present system of monthly transfer of premiums to the pool administrator should be discontinued.
The Authority vide circular no. IRDA/NL/CIR/MPL/059/03/2010 dated 31st March, 2010 rationalised the Motor Third Party Pool for commercial vehicles with effect from 1st April, 2010.
The Authority has modified the mechanism for operation of the pool, whereby the existing system of monthly transfer of funds by the insurance companies to the pool administrator has been discontinued with effect from 1st April, 2010. Since the motor third party business is expected to run on a ‘no profit no loss’ basis, there shall be no ceding commission in respect of the business ceded to the pool, it will be obligatory on the part of the insurance companies to segregate funds on account of the pool business in their accounts and invest them in a manner as provided in the IRDA’s Investment Regulations.
The Appointed Actuary of the insurance company is required to confirm in his report, the incorporation of the pool liabilities, including revisions, in the company’s accounts. The fees of 1.25 per cent of the premium to the pool administrator, has since been revised to 0.75 per cent. All operational expenses and the automated transaction level data (data upload) will continue to flow from the companies to the pool administrator.
As regards the treatment of monies remitted to the pool administrator upto 31st March, 2010; the pool administrator shall follow up with the insurance companies to recover all monies payable to the pool up to 31st March, 2010. The Fund, after adjustments, will be distributed back to the insurers by the pool administrator after due reconciliation.
Class wise Performance of Motor Pool I.4.4.7 As per the data uploaded by the member companies to the pool database, during 2009-10, there was 5-9 per cent increase in the number of policies underwritten under goods, passenger and miscellaneous class vehicles over the previous year. Trailers and Road Transit Risk policies rose by over 25 per cent. However, ‘Internal Risks Only’ policies witnessed 43 per cent decline.
The overall growth in number of policies underwritten during 2009-10 over 2008-09 was 7.63 per cent. I.4.4.8 The number of claims submitted during 2009-10 saw 180 per cent increase from 50,579 to 1,42,138. Similarly, the amount of claims paid during 2009-10 (`759 crore) was four times the amount of claims paid during 2008-09 (`182 crore). Commercial Vehicles (Goods) saw a major jump in claims paid from `109 crore in 2008-09 to `470 crore in 2009-10. Similarly, Commercial Vehicles (Passenger) witnessed growth in claims paid from `55 crore in 2008-09 to `216 crore in 2009-10.
Motor Insurance – Third Party Claims – Identification of Development Patterns and use of results for pricing, reserving or other purposes I.4.4.9. The actuarial analysis of approximately 5 lakh transactions for identification of claims development patterns relating to Motor Third Party Insurance for
(i) goods carrying vehicles and
(ii) passengers carrying vehicles has revealed the development pattern for three stages, viz., (i) loss events, (ii) loss intimation and (iii) claim settlement. The analysis reflects the month in which the claims development pattern is completed.
Courtesy: IRDA Annual Report 2009-10
