MUMBAI, February 7: After a gap of nearly seven years, the General Insurance Corporation (GIC) has decided to raise the third-party motor insurance premium with effect from February 15. This will enable GIC to wipe out the entire loss of Rs 1,200 crore accrued on account of third-party motor claim by the year 2000.With the forthcoming hike - pegged at a maximum of 490 per cent for trucks and 224 per cent for cars by the end of 1998-99 - the industry can compensate about Rs 400-500 crore of loss. The Tariff Advisory Committee - the statutory body for fixing tariffs - has issued a circular outlining the new rates to insurance companies.
The motor portfolio constitutes about 33 per cent of the total general insurance business. A third party insurance is compulsory for the country's vehicle owners.
GIC had failed to launch the revised price-hike scheme 10 months back as the a string of associations of motor owners had opposed it tooth and nail.
Consequently, the ministry of finance also instructed theGIC to put on hold the launch of the hike in third party premium. The last hitch to premia hike was cleared last month when a division bench of the Calcutta high court vacated the stay by a single judge over the issue.
"We expect a smooth sailing while effecting the price hike on third party motor claim as a task force has already undertaken detailed discussions with all the associations," said the Tariff Advisory Committee general manager CN Ravi.
The institution will now work on reducing the tariff rate for fire and marine premium, Ravi said. The reduction in premia for these categories of business was due, but could not be implemented, as the loss out of the third party motor claim was too heavy.
"There is an urgency in launching the new price for third-party motor insurance as every day the percentage of loss is mounting," said a GIC official. The general insurance industry is losing almost Rs 2.5 crore per day, he added. The loss during the 1995-96 was to the tune of 195 per cent. It was 327 percent during the 1996-97.
While the attempt to launch the price hike 10 months back was on the basis of the loss till 1995-96, the calculation of the hike -- to be effective from February 15 -- has taken into consideration the loss of 1996-97.
For commercial vehicles the hike will be effective over three years and for non-commercial vehicles it will be done over two years. However, according to the observers, some of the associations and even political parties may raise a hue and cry against the hike. "GIC has taken a calculated risk by deciding to hike the third party premia at this juncture. The fate of the new scheme will be clear in the next fortnight," industry watchers said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
