Straight from the Specialists
(Any opinions expressed here are those of the author and not of Reuters)
A motor insurance policy consists broadly of two parts — third-party cover, which is regulated; and an ‘own damage’ cover, the premium for which is left to market dynamics.
The premium for ‘own damage’ cover, which forms the larger chunk of the insurance premium, is based on risk and competitive pressures.
The third-party cover, which is compulsory, covers the risk for third parties in situations like damage caused to a person who was standing by the road and was injured or killed by an accident involving an insured vehicle, or damage caused to a wall after a vehicle crashed into it. The claim amount in this case can be unlimited and it is a sticky subject.
The Insurance Regulatory and Development Authority (IRDA) decides the premium that can be charged for different types of motor vehicles using elements like cubic capacity, types of activities being undertaken and tonnage as primary segregating tools.
(The views expressed in this column are the author’s own and do not represent those of Reuters)
“Till now our focus was to work as a development authority but now it has been more than a decade and it is time to act as a regulatory authority,” Hari Narayan, the chairman of India’s Insurance Regulatory and Development Authority (IRDA) was quoted as saying in a recent interview.