The Insurance Regulatory and Development Authority on Thursday formed a sub-committee to examine the issue of reforms in the third party motor pool.
The Authority had convened a meeting with the general insurers and general insurance council here today to convince them on the need to dismantle the motor pool.
The committee, which has representatives of both private and public sector general insurers, has been asked to submit its recommendations within a week.
When asked about the regulator's view, Mr J. Hari Narayan, Chairman, IRDA, told
“I am convinced that dismantling of the pool will be in the interest of all the stakeholders — the industry and the policyholders.”
Created in 2007 after opening up of the general insurance sector, the main purpose of the motor third-party pool was to ensure availability of motor third-party cover to commercial vehicle owners at reasonable prices.
“But the present mechanism is diluting the responsibility of the insurers and causing unnecessary losses to some players. This has to be rectified but some have reservations on this issue,'' Mr Hari Narayan said.
Some small players were ‘irresponsibly' writing the losses to the pool which is causing a loss to the public sector companies as well as big private players.
According to IRDA data, the expected ultimate loss for the third-party pool had gone up from Rs 5,271 crore to Rs 7,493 crore in 2010-11.
“Finally, the logic should prevail in any decisions hence the pool has to go,'' the IRDA chief said.
Plans were afoot to introduce a decline pool after dismantling of the existing motor pool.
IPOs
On the response to the recently-notified norms on initial public offerings of life insurers, Mr Hari Narayan said there was no response from the industry.
“I don't think there will be any immediate response from the industry given the present concern on the state of economy and markets,'' he said.
Only insurance companies that have completed 10 years of operations are eligible to go for initial public offerings.