Major General Insurance companies have not welcomed the new provision in the Insurance Ordinance regarding the third party motor insurance segment. The Insurance Regulatory Authority of India (IRDA) has made it clear that insurance companies need to provide the third party motor insurance cover in proportion to their market share. This move has caused an imbalance regarding major insurance providers.
This means that if a company has 5% market share, then its third party motor insurance cover also needs to be in that proportion. Currently, the insurance industry is facing losses around `7,000 - ` 8,000 crores in terms of overall profitability due to this segment. Insurance companies are of the opinion that such a move will cause an imbalance and will prompt an increase in the premium rates.
Regarding the ordinance, Mr. Sanjay Datta, Head of Underwriting, ICICI Lombard said, "Our loss ratio continues to be over 100 per cent under third-party motor premium. Though we will come to know of our present market share by March only, I believe that things like declined pool and price hike in premium may help us contain the losses under the segment." Third party motor insurance losses are suffered by both private as well as public players.