Days after general insurers aired their concerns over losses from third party motor insurance, the finance ministry has issued guidelines for settling such cases that would help reduce their liability and also check fraudulent claims. As part of a road map of common mechanism for compromised settlement of such claims, the ministry has asked general insurers to negotiate third party motor insurance claims to ensure faster settlement of claims and also stop issuing cover notes for such policies. General insurance firms had met finance minister P Chidambaram recently to discuss issues ailing the sector.
Although Chidambaram has promised long term measures to cut losses in the sector such as a separate Motor Vehicle Insurance and Compensation Bill for obligatory underwriting of third party risk, ministry sources said that the norms are an immediate measure to help the insurers that are estimated to shell out over Rs 10,000 crore annually as liability for such policies.
As the name suggests, a third party motor insurance policy protects the vehicle owner from any financial liability in case of any injury or death of a third person through an accident with the vehicle.
Since it is the most basic form of car insurance and is mandated by law, it has one of the highest claim ratios in the non-life sector. Since many private sector insurers do not offer the policy, it is largely done by the four public sector general insurers — New India Assurance, National Insurance, Oriental Insurance and United India Insurance.
