IRDA/RCS/MTP/11/02 28th May, 2002
Re: Ceiling on Loading of Premium and acceptance of
Exclusive Third Party Motor Proposals
This is further to our order dated 17th May, 2002 on the above subject.
1. The Authority has received numerous representations that state owned companies and other insurers have adopted a very selective approach in granting third Party cover to commercial motor vehicles and if the cover was at all granted it was with a loading of 200% or 300%. The instructions to this effect have been issued by some of the head offices /or Regional Offices of the companies to their respective Divisional Offices/Branch Offices. We have been supplied with copies of such communications. The Authority is also aware of the different interpretations of these instructions followed by the different offices of the same insurer and in some rare cases different yardsticks being applied by the same underwriting office to different clients.
2. We have already clarified vide our previous circular dated 17th May, 2002 that exclusive third party cover which is compulsory as per MV Act, cannot be refused by any insurer to any vehicle having a valid fitness certificate and insurers can load only third party premium as per the guidelines specified in the circular i.e. the insurers may load the third party tariff motor premium up to 100% if the claim experience of any individual owner is adverse as per the insurer’s assessment. If the experience continues to be bad, then a further loading of up to 100% on the expiring premium can be charged. Insurers may not load the premium further.
3. Since the loading has to be done on the claims experience of a particular individual owner/fleet owner and not on a universal basis the companies should come out with specific guidelines in this respect for their operating offices to follow. This may be done after analysis of claims experience of particular territory or fleet and then lay down the range of loading as per para 2. The Authority for the present would like to leave this discretion to the management of the insurers. In the event of varied and violent interpretations taking place, the Authority will reserve its rights to intervene and specify guidelines in this regard as well.
4. It is likely that the ownership of a vehicle/fleet may change during the currency of the policy or the insurers may change at the time of renewal. It is essential that an insurer must obtain duly completed proposal form giving details of previous insurance cover, insurer and claims experience if not known or stated. The insurer should make reference to the previous insurer for full details if thought necessary. The previous insurer is obliged to send the full details, so that on percentage loading etc. decisions could be taken by the new insurer on the basis of full and available facts.
5. The Authority would be uploading the circular on the Website. Adequate publicity to this communications may be given by the insurers and all their underwriting offices be fully kept informed. The Authority issues these directions in the general interest of the policy holders and the insurer to ensure a smooth operation of the system and hence will not like any deviation form the above to be adopted by any office of any Insurer. Insurers are advised to implement above instructions forthwith and confirm to OSD in the Authority (Shri Prabodh Chander).
(N. Rangachary)
Chairman.