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ANNUAL REPORT 2011-12
focused category. Over the year, the Inspection
department has been strengthened not only in terms
of redeploying specialized supervisory resources,
but also through initiating a process of undertaking
necessary measures so as to ensure a more focused
and objective approach to the working of this
function of the Authority. Substantial emphasis has
been given for inspecting comprehensively those
entities which were not inspected previously and
with respect to which specifi c references have been
received and in the opinion of the Authority needed
focused assessment. The actions taken on critical
observations of the previous inspection reports and
their impact on the overall functioning of the insurance
sector have been the guiding principles for constantly
improving the quality of on-site inspections.
III.9 Control and regulation of rates, advantages,
terms and conditions that may be offered by
insurers in respect of general insurance business
not so controlled and regulated by the Tariff
Advisory Committee under section 64U of the
Insurance Act, 1938 (4 of 1938)
III.9.1 With de-tariffi ng of non-life industry w.e.f.,
1 st January, 2007, for all classes of tariff business
except motor third party cover, the fi rst steps were
initiated to ensure that the insurance companies
have the freedom in pricing of the products. For
motor third party cover, which is a statutory insurance
cover required under the provisions of Motor Vehicles
Act, 1988, the Authority has retained the powers
to determine the rates, terms and conditions. The
Authority decided to hike the premium rates to the
tune of 10 per cent in respect of two wheelers and
private cars; and 68.5 per cent in respect of the
commercial vehicles. It was also notifi ed that long
intervals between rate revision puts an avoidable
strain on policyholders as well as on the insurance
companies and therefore the rates would be reviewed
and adjusted annually in line with the formula notifi ed
by the Authority. As per the prescriptions, the revision
in the premium rates has been pegged to the cost
infl ation index, average claim amounts, frequency
and expenses involved in servicing the motor TP
business. The revised premium rates for third party
motor insurance cover were notifi ed by the Authority
on 15 th April, 2011 and the new rates became
operational w.e.f., 25 th April, 2011.
III.9.2 Except for Motor Third Party risks, in case of
other new insurances and renewals effective on or
after 1 st January, 2007, respective insurers are free
to quote rates of premium in accordance with the rate
schedules and rating guidelines fi led with the Authority.
Risks qualifying as large risks under paragraph 19 (v)
of the Circular No. 021/IRDA/F&U/ Sep-06 dated 28 th
September, 2006 are to be insured at the rates, terms
and conditions and basis of insurance exactly as the
rates, terms etc., as developed from the reinsurers
with no variation.
III.9.3 Further, w.e.f., 1 st January, 2009, the Authority
has permitted relaxations in the terms and conditions
of coverage of the erstwhile tariff classes of business
in fi re, engineering, Industrial All Risk (IAR) and
Motor (Own Damage). In view of the relaxation, the
Authority has been receiving proposals for innovative
covers in the form of ‘Add-On’ covers in the above
said classes of business to enhance the coverage.
However, the insurers are not permitted to abridge the
scope of standard covers that were available under
the erstwhile tariffs beyond the options stipulated in
the erstwhile tariffs. During 2011-12, about 37 addon
covers were approved by the Authority in different
classes of insurance.
To ensure that the third party motor insurance (also
called ‘Liability Only Cover’) is made available notably
for commercial vehicles, the Authority had constituted
the Indian Motor Third Party Insurance Pool for
commercial vehicles. The setting up of the Motor Pool
ensured involvement of all insurers in the underwriting
and management of motor third party risks. The pool
was managed by the General Insurance Corporation
for a prescribed fee.
III.9.4 During the year 2010-11, the Authority
reviewed the performance of the IMTPIP pool
through a series of initiatives, viz. studies on the
valuation of the liabilities of the pool, discussions with
industry players, formation of a Committee to review
the current operational mechanism of the pool, etc.
It was revealed that the framework of the pool was
severely affecting the fi nancial viability of the general
insurance sector due to alarming capital depletion
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