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Sarbajeet K. Sen

NEW DELHI, May 17

IN what could lead to a fresh stand-off between insurers and the transport industry, the Oriental Insurance Company Ltd (OIC) has taken the lead among public sector insurers in plugging losses in the motor portfolio by advising its offices across the country to adopt a selective approach in transacting fresh business under the category.

The company has also instructed its operational offices that fresh motor cover, especially involving third party liability (TPL) cover, should be extended only on company-set terms on loading (hike in premium) which has to be arrived at not only on the basis of individual claims experience but also on the average losses suffered by Oriental in the region.

"We have told our offices that motor TPL cover should be given only after proper assessment of the claims scenario and that loading (hike in premium) should be done accordingly on a case-to-case basis so that it covers the risk. If the customer does not agree to the loading, he has to go elsewhere," a senior OIC official said.

The official said that the move had been taken on account of the sustained high losses suffered by the company on the motor portfolio. During last year, OIC's overall claims outgo on the motor business was 221 per cent over the premium collected by the company.

"The level of losses is not sustainable. It is true of all four public sector companies. At this rate, all of us would slip into the red," a top OIC official said.

The problem for the PSU insurers on the motor front has become compounded with the entry of private sector insurance companies, which are allegedly taking away the less risky motor business. Moreover, with much of the creamy layer of the other portfolios, such as fire, moving away to private companies, the percentage of motor insurance in the overall business is showing a steady rise. "There is no level-playing field among the private and public insurers. Most private players are not extending any third party, only liability cover," the official said.

However, the transport industry has already protested OIC's move. In a communication to the officiating Chairman and Managing Director, OIC, Mr Ajit M. Sharan, also Joint Secretary, Insurance, Ministry of Finance, the All India Confederation of Goods Vehicle Owners' Association (AICGVOA), has said OIC's move runs contrary to the directions of the Insurance Regulatory and Development Authority (IRDA).

The IRDA had earlier told insurance companies that they could not deny exclusive TPL cover and that loading should not exceed more than 100 per cent depending on the claims experience of the client.

"The directions of the IRDA should be honoured and respected by all insurance companies and the Ministry of Finance should discharge its due responsibility to ensure that the authority of IRDA is not disrespected or disregarded," said Mr Chittranjan Dass, Vice-President AICGVOA.

However, OIC officials deny that they have violated any IRDA instruction, and say that the issue is still being discussed with the insurance regulator.

"If the loading is capped, motor would become an inherently loss-making business. In that case, the Government should work out a way to compensate the losses of the companies," the company officials said.

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