The general insurance industry is working on revising premiums upward on third-party liability for commercial vehicles (CVs). The move comes after rising claim ratios and losses suffered by general insurers, which is as high as 170 per cent of the premium collected.

General insurers have approached the General Insurance Council to work on repricing of premiums in this segment. Premium on third-party liability of CVs is regulated by the Insurance Regulatory and Development Authority (Irda).

“We will soon hold meeting with transporters associations to work out the details. We will approach them with all the numbers and details of claim ratios. High claims ratio in motor third-party commercial vehicles has been a cause of concern for the industry,” S L Mohan, secretary general, General Insurance Council, told Financial Chronicle.

An official at the ministry of finance agreed that the high claim ratio has been a concern for the industry. "The general insurance industry is working at repricing of premiums in third-party commercial vehicles. They are in draft stage right now. Once the details are finalised, General Insurance Council will approach Irda," the official said.

The business is dominated by the four general insurance firms in the state sector — National Insurance, New India Insurance, Oriental Insurance and United Insurance, which together have over 80 per cent of the motor insurance business. So their losses on this account are also the highest. Private insurers nevertheless have to share the overall business risks and thus the losses.

M Ramadoss, chairman and managing director of Oriental Insurance, said: "It will take some time before the premium is revised. Industry representatives will meet transporters’ association and try and work out a solution. Third-party commercial vehicle motor insurance has been as high as over 170 per cent. Each firm has a backlog of over 200,000 pending claims."

To address concerns of the industry over high claims ratio in this segment, India Motor Third Party Insurance Pool (IMTPIP) started operations in April 2007. The pool, comprising 17 public and private sector non-life insurers, takes overall CV third-party motor risks. The share of each insurer in the pool was on the basis of gross direct insurance premiums collected. The pool was intended to provide a mechanism for containing the high claims ratio. Until 2007, the losses from CV third-party liabilities were entirely borne by the public sector. The high losses, in turn, resulted in the underwriting business being in the red. The pool mechanism had cut the losses to some extent because the risk was shared among all the 17 companies.

“Insufficient third-party premiums are one of the main reasons for a high loss ratio. Since third-part motor insurance premiums are regulated, any review has to be done by the regulator. But efforts are being made to reprice it correctly,” said an official of a private insurance firm, who did not wished to be quoted. However, private players want to return to the old system. With the number of risk covers rising, losses have also mounted, bleeding capital from the private general insurance companies.