Debjoy Sengupta & Shilpy Sinha,ET Bureau
KOLKATA | MUMBAI: The Insurance Regulatory Development Authority's ( Irda )) decision to raise third-party premium for commercial vehicles by about 65-70% on an average is making various transport associations look at the possibility of floating their own general insurance company to cover their vehicles.
Transport associations across the nation have called an emergency meeting on Wednesday to protest the hike that will be applicable from April 25. Some 70-lakh commercial vehicles and 400-odd transport associations all over the country may also go on a nation-wide strike. Gill Raghabir Singh of Gills Roadways Association said the transport association may look at setting up an insurance company of its own.
"We have called an emergency meeting on Wednesday. We may boycott insurance companies and may look at forming an insurance company for third-party motor vehicles," he said.
Gurinder Pal Singh, chairman of the All India Motor Transport Congress , which is the apex body for all transport vehicles, including trucks and busses, said: "We may go on a nation-wide strike of all transporters if need be. Four years ago, the insurance regulator had increased third-party premiums by 150% but was later forced to roll back to 60%. Our costs are spiraling on a regular basis mainly due to rise in diesel and petrol prices. An additional rise in insurance premium will squeeze our already wafer-thin margins. Third-party insurance premiums vary between Rs 10,000 and Rs 20,000, depending upon the class of the vehicle every year. We will now have to shell out anything between Rs 17,000 and Rs 34,000."
Mahendra Arya, member, advisory committee of the Bombay Goods Transport Association, said: "The industry has segregated the data into two parts. Insurers are making a profit on the composite. There is no justification in the rate hike." Tapan Banerjee, joint secretary, Joint council of Bus Syndicates, a bus owners' association in Kolkata , said: "Once the elections in West Bengal are over, we will take the legal recourse. Bus owners are incurring losses on a daily basis and the cost of insurance, including thirdparty, varies from Rs 25,000-40,000 per year. A hike will hit our bottom line adversely and may force many owners to exit the business."
Bengal Bus Syndicate vice-president Dipak Sarkar said: "Tariffs are determined by the state government after discussions with bus owners. We have not been able to raise tariffs for the last one year despite rise in input costs. This is resulting in heavy losses for all bus owners. Any additional rise in costs will be detrimental."
Ashok Banerjee, professor of finance at IIM Calcutta says: "Claims under third party have been historically disproportionate to the premium income. There are a number of instances where vehicles are not maintained properly, leading to accidents and third-party claims. In the overall demand-supply scenario, higher premiums should act as a disincentive to insure poorlymaintained vehicles, so that in the long run, vehicles are maintained better and claims reduce."
S Shrivastva, secretary-general at the Insurance Institute of India said: "The sum assured under third-party insurance is unlimited and doesn't depend on the year of the incident. Even heirs of accident victims can claim liability after several years. This makes it difficult for insurers to provision any claims payable. Additionally, liability claimed by the person suffering injury depends upon a host of factors, including the financial condition of the individual. These factors have resulted in the number of claims rising over the years as well as the claim amounts. A 70% rise in premium is barely enough to meet insurers' liabilities."
Source: Economic Times
http://economictimes.indiatimes.com/articleshow/8023267.cms?prtpage=1
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