Car insurance may be cheaper from Jan

Come January 2007, insurance premiums for commercial vehicles may see a sharp rise, while private vehicle owners may need to pay a little less than what they have been paying till now.

This is because the claims ratio in the commercial vehicle segment is 150-300 per cent, while private vehicles have an average claim ratio of 80 per cent.

In a change of stance, the Insurance Regulatory and Development Authority of India has decided to go ahead with the lifting of controls on premium for motor insurance, along with other risks, from January 2007.

In its roadmap for a tariff-free regime issued in September 2005, the insurance regulator had stated that free tariffs for fire and engineering would kick off in January 2007, but kept the decision on motor insurance in abeyance. The regulator had said it would take "a view on de-tariffing of motor insurance" later.

The total premium income for the industry from the motor portfolio is around Rs 8,000 crore, and private vehicles account for about 65 per cent of the market.

Private insurers have been shying away from insuring commercial vehicles as the premium rates are very low, and the highly loss-making business is being underwritten mostly by public sector general insurers.

On the sidelines of the 1st Asian Life Insurance Summit, IRDA Chairman C S Rao said, "There have been meetings with the transport industry, and one more meeting will take place in September. Insurance companies are gearing up (for the free tariff regime). The motor portfolio will be 100 per cent detariffed."

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Tags: insurance premium, Asian Life Insurance, transportation