INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

Dated: 24.04.2020

Report of the Working Group (WG) to revisit the IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance business) Regulations, 2015

1. The Authority vide order ref:IRDAI/NL/ORD/MOTP/149/08/2019 dated 28.08.2019 constituted the Working Group to revisit the IRDAI (Obligation of Insurer in respect of Motor Third Party Insurance business) Regulations, 2015

2.  The WG has come up to a conclusion that the MTP Obligation should be a function of “number of vehicles insured/uninsured” instead of “premium derived from motor third party insurance business” and accordingly a simple & equitable formula for calculating the MTP Obligation has been proposed.

3.  The following is a summary of the recommendations of the WG:

A. The Obligation of an Insurer O(n) in respect to Motor Third Party insurance business for a Financial Year(n) should be arrived, for each category of vehicles defined in (B), as below:

a) Obligation of the insurer in the (n-1)th financial year = O(n-1)*

b) Percentage Market Share of the insurer as on 31st March of the (n-2)th financial year based on Gross Domestic Premium Income (GDPI) = M(n-2)

c) Number of uninsured vehicles as determined by IIBI for the (n- 2)th financial year expressed in absolute numbers independently for each category of vehicles defined in (B) = V(n-2)

d) Percentage of the uninsured vehicles (Insurance factor) intended to be insured in the financial year under consideration. The Insurance factor shall be determined and declared by the Authority every year for each category of vehicles defined in (B) taking into consideration the contribution of that class to the total uninsured vehicles in the country in the (n-2)th financial year = I

e) Obligation of the insurer to be met in a financial year

O(n) = O(n-1) + { M(n-2) x V(n-2) x I}

* MTP Obligations in each category for the 1st year (say for the FY 2020-21): Since obligations in terms of number of policies for the (n-1)th financial year (i.e in this case 2019-20) are not available, the actual MTP policies of the (n-2)th financial year may be considered for calculating the MTP obligations for the year 2020-21.

B. The categories of Vehicles on which the above obligations shall be applicable are:

i)  Two-wheelers,

ii)  Private cars, and

iii)  Others

C.  For long term policies, the Insurers may take credit for

i)  five/three/two years for two wheelers depending on the remaining term of the policy for which it is in force and,

ii) three years for private cars depending on the remaining term of the policy for which it is in force.

D. The existing exemptions may be continued.

E. A Motor third Party Credit system in lines with the Carbon credit system may be introduced for the first two years.

4.  All the stakeholders are requested to provide their feedback in the below format vide e-mail to janita@irdai.gov.in with a copy marked to sagar.bangal@irdai.gov.in latest by 8th May, 2020.

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One Comment

  1. GANDHI MOHAN BHARATI says:

    My feeling is to make an approach with regard the quality of drivers and charge premium accordingly. am holding a licence for past 55 years without an accident; I pay the same premium as a driver with less than 10 years driving having caused 17 accidents & making the Insurer pay heavily. Why not give me reduction and charge more for accident prone drivers?

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