A.M. Best Briefing: Indian Regulator Abolishes Declined Risk Pool for Third-Party Motor Insurance

SINGAPORE--(BUSINESS WIRE)-- In its decision to dismantle the declined risk pool for third- party motor insurance, effective as of April 1, 2016, the Insurance Regulatory and Development Authority of India (IRDAI) said there was no need to continue the declined risk pool mechanism after insurers were required by law last year to provide minimum coverage for the tariffed third-party motor insurance (TPMI).

The Best’s Briefing, titled, “Indian Regulator Abolishes Declined Risk Pool for Third-Party Motor Insurance,” states that underwriting performance of the TPMI business has improved, but remains loss making, despite repeated adjustments to TPMI tariffs, as tariff adjustments, have had to consider social aspects, such as consumer affordability.

However, inadequate tariff adjustments in the TPMI business are not the sole reason for the poor underwriting results in India’s non-life insurance market. Underwriting performance in the non-tariffed health insurance business, which now represents a larger share of the non- life market than TPMI, is hardly better, with net claims ratios now at a similar level as that of TPMI (over 95%), as some competitors prioritize market share over underwriting results. The gradual narrowing of underwriting losses in the TPMI business alone is unlikely to be enough to significantly improve the Indian non-life industry’s underwriting performance.

To access a copy of this briefing, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=247619.

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Source: A.M. Best