The public sector general insurance companies were suffering losses in the motor portfolio from the past decade. With a view to examine the various aspects of motor underwriting including de-tariffing and pooling arrangements, the authority has constituted a committee chaired by justice Rangarajan in which insurance companies, automobile manufacturers, truck operators, consumers were represented as members. One of the recommendations made by the committee was to de-tariff the own damage business of motor portfolio under a competitive premium-setting model by a file and use procedure with a time schedule for the change over. IRDA after discussing the matter with the General Insurance companies, decided that the motor own damage portfolio should be de-tariffed w.e.f. April’ 2005. The other recommendations of the Rangarajan’s committee were: · to quarantine the TP insurance business and its accounting in insurance companies books; · to request GoI to review the statutory liability for TP liability for motor vehicles accidents; · to set up an independent data bank under TAC and compel the companies to supply the data to the bank, and draw on the bank data to justify proposed tariffs. As there is not much progress made with regard to implementations of these three recommendations, during the recent meeting of the non-life insurers had with the chairman, IRDA on December 17, 2004, it was expressed that both the motor (OD) and TP should be de-tariffed simultaneously as de-tariffing of motor (OD) portion only will lead to cross subsidisation. Since the issue of de-tariffing of motor (TP) was never taken up and the data available with the companies cannot be said to be very accurate and dependable, IRDA cannot consider its de-tariffing at the moment. Further, motor (TP) being the statutory cover required under Motor Vehicles Act, the insurers stressed on the need for amendments in some of existing provisions of the MV Act viz. Limitation clause, jurisdiction clause etc. and approached the authority to take up the matter with Ministry of Surface Transport suitably. Since all these procedures do take considerable time, the de-tariffing of motor (OD) on standalone basis is postponed for the time being.

What is now the IRDA’s agenda on de-tariffing When do you plan to unveil this?

In order to spread the risks across, it is essential to have well established data systems as well as prudent underwriting practices. Lack of accurate data is one of the biggest hindrances in the scientific pricing of the products without which de-tariffing can show negative effects on the insurance industry thereby defeating the very purpose. The authority is of the view that the de-tariffing should take place in a phased manner.

If the two areas of IRDA’s concern on de-tariffing are availability of data and underwriting skills and pricing, how are you planning to address them?

At present TAC is a statutory body responsible for regulating rates. In order to regulate rates on scientific basis, it needs data which TAC is collecting particularly in the tariff area. The TAC is in the process of strengthening its existing infrastructure and developing skills so that it can act as a facilitator for non-life insurers.

When do you plan to convert TAC into full-fledged information house?

TAC has already embarked on the exercise of strengthening its infrastructure and developing skills for collecting, analysing and dissemination of data.

IRDA is concerned about the fact that there is not enough reinsurance expertise in terms of manpower available in the Indian market. How do you plan to address this problem?

Before opening up of the insurance sector, GIC, on behalf of all the four public sector general insurance cos. used to place the reinsurance business abroad. In these insurance companies, the reinsurance department used to function at head office level. Today, there is only one reinsurance company in India and other reinsures are based abroad. Hence, the available reinsurance experts are limited. With the growth of insurance market, we expect that there will be a demand for more reinsurance experts who have to be trained and groomed by the insurers.