The Insurance Regulatory and Development Authority of India (IRDAI) on Tuesday issued new guidelines for general insurers fixing obligations concerning motor third-party (MTP) insurance.
In a circular, IRDAI said that every general insurer should “underwrite such minimum percentage of insurance business in third party risks of motor vehicles,” as specified under Section 32D of the Insurance Act, 1938, after the commencement of the Insurance Laws (Amendment) Act, 2015.
In addition, regarding co-insurance arrangement as part of the risk-sharing program, it has been clarified that “inward co-insurance” will not be considered for “reckoning compliance” to the referred rules.
The regulator further said that all the obligations of an insurer regarding their MTP insurance business are also specified for every financial year in IRDAI regulations, 2015.
The rules are aimed at increasing MTP insurance penetration in the country. Earlier, the authority published a draft consultation paper on the subject for feedback from various stakeholders.
The regulator felt that the present formula does not indicate the percentage of insured vehicles from the total vehicles plying on the road, necessitating revisiting the 2015 regulations.
Furthermore, it was felt that it does not guarantee increased penetration under each vehicle category nor address the treatment of long-term MTP policies.
Of late, IRDAI has been considering several changes to streamline access, support, and expedite claims by collating information on all insurance policies held by an individual, such as life, health, travel, motor, and group, at one single place.
To achieve this, IRDAI has authorised dematerialisation of all new and old insurance policies by the year-end. Experts said this would make the insurance process convenient for customers. However, they said these changes might have been delayed earlier due to operational challenges and cost concerns.
IRDAI has also made e-KYC (electronic-know your customer) mandatory for all insurance policies, starting November 1, 2022, which will help in the dematerialisation process as well, done through the National Securities Depository Ltd. (NSDL) and the Central Depository Services Ltd. (CDSL).
Dematerialisation or ‘demat’ allows a policyholder to store the insurance policies electronically with an insurance repository. It removes the need for paperwork while renewing the policies, reducing transaction costs and enabling quick policy modification.
Experts said it would work the same way as people keep shares in a demat format.
