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HC cancels IRDA order to increase 3rd-party premium: Reports

The Calcutta High Court has cancelled a notification by IRDA increasing premium on motor vehicles for third-party cover

June 21, 2012 12:21 IST | India Infoline News Service
In an order on 18th June, the Calcutta High Court has cancelled a notification by IRDA (Insurance Regulatory and Development Authority) increasing premium on motor vehicles for third-party cover.

According to media reports, the order pertained to a petition filed by Asansol Mini Bus Association and Federation of West Bengal Truck Operators Association, who had appealed against the increase in premium by IRDA on the basis that they were not given a fair hearing.

The court said in its order, “This order will not prevent the respondent authority from revising/increasing the premium rates for Motor Third Party Insurance Liability 2012-13 adhering to the directions given by the Hon'ble Supreme Court in the matter of Joint Council of Bus Syndicate (supra)."

In March 2012, the insurance regulator in an order increased the third-party premium for two-wheelers and cars for 2012-13. The third-party premium for personal cars and two-wheelers was increased by 5%, while for commercial vehicles, the premium was hiked by 15%-20%.

Third-party premium refers to the mandatory cover that all vehicle owners need to buy to make sure that accident victims get compensation from insurers. Although all premium rates have been decontrolled, third-party rates are still regulated by a constitutional body—Tariff Advisory Committee—under IRDA since the cover is mandatory.

On the other hand, insurers claim that the business is unprofitable for them. Insurers said that the motor third party premium was revised on the basis of a formula. This formula was devised several years back following consultations with transport associations across the country. The formula was based on the claims ratio (the amount of money insurers paid as a percentage of the premium received).

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