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Motor TP insurance: Administered price, long term cover vs deregulated price, one year cover

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 The Indian general insurance industry is divided on the aspect of long term versus one year motor third party risk cover and its pricing mode.

However, they are unanimous in their view that the third party insurance should be under them and not with the central government or administered as a pool.

Vehicle insurance policies are two parts — own damage (insurance for the vehicle against damage, theft) and third party liability (liability for third parties).

The third party insurance cover is mandatory whereas the insurance cover for vehicle damage is not mandatory. The premium is fixed by Insurance Regulatory and Development Authority of India (IRDAI).

The general insurer’s role in designing the risk cover, promoting it, and fixing the premium is almost zero.

“I am for the deregulation of the third party premium rates. The premium rate is not administered one in major countries,” Varun Dua, Managing Director and CEO, Acko General Insurance Limited, told IANS.

Like him, many CEO when asked by IANS agree for deregulation of premium rates but strangely that is not happening.

Even after two decades after liberalisation of the sector citing various reasons including reduction in premium, insurers seem to want the price to be administered with yearly upward revision and not as per their claims experience.

Nearly 40 per cent of the general insurance business is from the motor insurance vertical and a major portion of that from third party risk cover, insurers are not enthusiastic about any changes resulting in lower premium and investment income.

Contrary to the claims made by the general insurers that they are incurring huge losses under the motor portfolio, the numbers as per the Insurance Information Bureau of India (IIB) study shows the contrary.

In its annual report on motor insurance for the fiscal 2018-19, the IIB said a sum of Rs.35,519 crore of motor claims – towards vehicle damage (Rs.18,262 crore) and third party liability (Rs.14,257 crore) were settled during 2018-19- while the gross underwritten premium was Rs.64,522.35 crore.

According to the report, the average settlement amount for death claims during fiscal 2018-19 was Rs. 901,207 and for injury claims it was Rs. 251,094.

The industry players also claim that a large number of vehicles run on the roads without third party insurance.

However, they do not have any answer when asked how that impacts them as they pay claims only on those policies issued by them and it is for the police to penalise the violators.

Industry players say they bring in efficiency in third party loss management when queried about insurers being freed of third party insurance in favour of the central government or administered as a pool.

“The insurer is bringing in expertise and efficiency in loss administration and fraud control. At the same time, claims administration requires a lot of manpower and infrastructure which has already been set up and improved by various insurers,” Adarsh Agarwal, Appointed Actuary, Go Digit General Insurance told.

According to him, a policyholder decides on the mode of claim for vehicle damage – whether under own damage part or getting into an arbitration for a third party claim under a third party property damage clause- separating the two may put him into difficulty.

Unless there is a process advantage that speeds up the third party claims with the judiciary involved, Agarwal added.

“One cannot wish away the role of insurers. They ensure easy access, availability of such insurance products which cannot be replicated by an already overburdened government,” R. Raghavan, former General Manager of General Insurance Corporation of India (GIC Re) and founder CEO of Insurance Information Bureau of India (IIB) told IANS.

Insurers are well equipped to handle the stretched claims process in Motor Accident Claims Tribunals and subsequent litigation, he added.

Raghavan said, though IRDAI still keeps finalising the premium rates, the insurers supply necessary data for the actuarial pricing process.

On the point of long term motor third party policy Raghavan said: “It is in the interest of the society at large, for insurance terms to be longer in duration. It also helps insurers to balance their books towards making adequate provision for such long tail liabilities. Portability may effectively undo this equity and also lead to wild goose chase in pinning the right insurer for payment. An insurer with a multi year commitment will work on price efficiency too,” Raghavan said.

Differing on that Agarwal said: “Long term policies have a twofold problem. A customer is encouraged to stick to one company despite the service quality they get from the current insurer as changing the insurer has an inherent inertia mid-way. Secondly, accounting the spare portion and labour cost for a longer term, given the inflation, is tricky and not ideal for the general insurance industry.”

“If one makes non-life insurance a long-term contract, the capital needs, provisioning norms and others would kick in. How it would impact an insurer in the future as motor third party claims are long-tailed ones is not known now,” and industry official told preferring anonymity.

Locking in a policyholder for five long years with one insurer also makes the playing field anti-competitive and anti-policyholder.

“The vehicle dealers will have an upper hand. They will demand higher compensation from the insurers. Already dealers are selling only policies of those insurers from whom they get higher commissions and other perks,” an industry official told

National

SC dismisses plea seeking action against Maha officials over protocol lapse during CJI’s first visit

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New Delhi, May 23: The Supreme Court on Friday dismissed a petition seeking action against Maharashtra government officials over protocol lapses during Chief Justice of India (CJI) B.R. Gavai’s first visit to the state on May 18 after taking over the country’s highest judicial post.

A bench of CJI Gavai and Justice A.G. Masih opined that the plea was filed with an intent to obtain “cheap publicity” and termed it a “publicity interest litigation”.

The bench refrained from imposing exemplary costs but asked the PIL litigant to deposit a cost of Rs 7,000.

In its order, the apex court said that soon after CJI Gavai expressed displeasure over the protocol lapse, senior Maharashtra government officials, including the Chief Secretary, came to meet him and expressed regret.

The top court, in a press statement released on Tuesday, said that CJI Gavai stressed that a “trivial issue should not be blown out of proportion” and requested everyone that “the matter be given a quietus”.

Following his taking oath as the 52nd CJI, Justice Gavai on Sunday (May 18) travelled to Mumbai for a felicitation programme by the Bar Council of Maharashtra and Goa. “If the Chief Justice of India is visiting Maharashtra for the first time, and the state’s Chief Secretary, the Director General of Police, and the Mumbai Police Commissioner don’t feel it appropriate to be present, then they need to reflect on that. There’s nothing new about the protocol — it’s a matter of respect from one constitutional institution to another,” the CJI said.

“It’s a question of respect by the other organs of the institution to the judiciary,” he added.

The three pillars of democracy — the judiciary, the legislature, and the executive — are equal, and every organ of the Constitution must reciprocate and show respect to the other, he had said. Following the episode, the Maharashtra government issued protocol guidelines to ensure adherence to official decorum during the visit of the Chief Justice of India to Mumbai and other parts of the state. It designated the CJI as a Permanent State Guest in Maharashtra under the State Guest Rules, 2004. Accordingly, the Chief Justice of India will continue to be entitled to all protocol-related facilities, including accommodation, vehicle arrangements, and security throughout the state during visits.

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Business

Lahore ATC refused to help IndiGo flight stuck in hailstorm danger

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New Delhi, May 23: The pilots of the IndiGo plane, which was damaged in rough weather en route to Srinagar, were denied permission by the Lahore ATC to venture briefly into Pakistan airspace to escape the hailstorm, in complete violation of humanitarian norms.

India’s civil aviation regulator, the DGCA, said the aircraft was cruising at an altitude of approximately 36,000 feet near Punjab’s Pathankot when it ran into a thunderstorm and hailstorm.

Experiencing severe turbulence, the crew first requested the Northern ATC of the Indian Air Force to allow the flight to deviate towards the International Border. However, the request was denied because it was felt that the plane would face danger from the Pakistan side due to the recently witnessed intense hostilities between India and the neighbouring country during Operation Sindoor.

The pilot then sought permission from the Lahore air traffic control (ATC) to briefly venture into Pakistani airspace to avoid the storm. But it was refused, too.

With limited options left, the pilot initially considered returning to Delhi. However, since the aircraft was close to the “thunderstorm cloud”, returning was considered an unsafe option. The pilot then decided to continue forward through the storm towards Srinagar on the shortest possible route, the DGCA statement said.

While navigating the thunderstorm, the aircraft encountered “extreme updrafts and downdrafts”, leading to the autopilot disengaging and its speed fluctuating.

“While in the thunderstorm cloud, warnings of an angle of attack fault, alternate saw protection lost, and unreliable airspeed indications were triggered,” the statement further said.

The DGCA said that at one point, the aircraft’s rate of descent reached 8,500 feet per minute. It further said that the crew took manual control of the aircraft during this critical phase till exiting the hailstorm.

The pilot then declared an emergency to the Srinagar ATC, which then activated radar vectors. The flight eventually landed safely in Srinagar with no reported injuries to any of the passengers or crew.

The DGCA said that the plane made a safe landing with the auto thrust system operated manually.

There was no injury to any of the passengers on board the flight. A post-flight check revealed damage to the nose of the aircraft. A full-fledged investigation has been launched into the incident, the statement added.

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Crime

Andhra Police begin questioning terror suspects after bomb plot detected

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Visakhapatnam, May 23: The Vizianagaram police in Andhra Pradesh on Friday took into custody two men, arrested last week in connection with an alleged terror plot, and were being questioned.

A day after the Vizianagaram District Court remanded Siraj-ur-Rehman and Sayeed Sameer to police custody for a week, the police took them into their custody from Visakhapatnam Central Jail and shifted them to Vizianagaram for questioning.

Senior officials, including the in-charge Superintendent of Police Madhava Reddy, were questioning the accused to probe further the alleged terror plot.

The National Investigation Agency (NIA), which is also investigating the case, may also interrogate the accused about their links with terror groups in India and abroad.

The duo is likely to be questioned about the plot and the activities of Al-Hind Ittehadul Muslimeen floated by them. The investigating officials will be trying to gather information about their contacts in Andhra Pradesh, Telangana and other states.

Siraj was arrested by Vizianagaram police following the recovery of explosives at his residence on May 17. The subsequent investigation led to the arrest of a second suspect, Sayeed Sameer, in Hyderabad.

Sameer was brought to Vizianagaram, and the duo were sent to judicial custody for 14 days.

They have been booked under the Unlawful Activities (Prevention) Act, 1967, and also under the Explosive Substances Act of 1908.

The two suspects had allegedly procured explosives online and were planning a trial of explosions near Vizianagaram.

According to police, Siraj is an engineering graduate from Vizianagaram while Sameer is a lift operator and is a resident of Bhoiguda in Secunderabad.

The two suspects had allegedly formed a group by the name Al-Hind Ittehadul Muslimeen to carry out their activities. The organisation reportedly has 12 members in cities like Delhi, Mumbai, Bengaluru, Hyderabad and Warangal.

Meanwhile, NIA and intelligence officials carried out searches late Thursday night at Tadigadapa in the Krishna district of Andhra Pradesh. They reportedly searched a house in which seven people were staying.

The officials reportedly picked up a few suspects and whisked them away. Their identity was not known. It was also immediately not clear if the search was related to a terror plot busted by the Vizianagaram police.

Following the Pahalgam terror attack and its aftermath, police and intelligence agencies are maintaining a tight vigil on suspects.

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