Seventeen non-life insurance companies raised a total of Rs 920.78 million in premium by selling third-party insurance policies for two-wheelers in the period between September 2009-when third party insurance schemes were first launched-and mid-January this year. But they extended Rs 339.99 million in compensation. [break]
That means only 37 percent of the total premium collected was spent on settling claims filed by policyholders.
If it is considered that these companies extended 15 percent of the premium amount as agent commission and used another 30 percent of the premium amount to cover administrative costs, they managed to generate around 18 percent of the premium amount as profit.
This evidence comes at a time when many non-life insurers consider third-party insurance business as ´charity´ or ´corporate social responsibility´.
“Yes, third-party insurance, in case of two-wheelers, is a profit making business. This is because owners of private two-wheelers are careful drivers in comparison to drivers of public vehicles,” a high-ranking official of the Insurance Board told Republica.
Third-party insurance schemes were launched as a remedy to protests launched over road accidents and demand for exorbitant compensation following such mishaps. Under these schemes, family members of person killed in road accident can claim for as much as Rs 500,000, while those injured in road accidents can claim for as much as Rs 200,000.
As per the Motor Directive of the Insurance Board, two-wheeler owners, with bikes of less than 150cc engine capacity, can purchase one-year third-party insurance policy for Rs 1,000. One-year third-party insurance policies for bikes with engine capacity of 150cc to 250cc and those above 250cc cost Rs 1,200 and Rs 1,400, respectively.
Once these policies are purchased, insurance companies bear up to Rs 5 million in case of loss of human life and up to Rs 5 million in case of damage to property.
Data compiled by the Insurance Board show one non-life insurance company collecting Rs 31.08 million in premium from sales of two-wheeler third-party insurance policy in between September 2009 and mid-January, while extending Rs 35.43 million in compensation to policyholder.
On the other hand, company like state-owned Rastriya Beema Sansthan raised Rs 12.99 million in premium in the same period but extended only 825,500 in compensation. This means the company spent only six percent of premium amount on settling two-wheeler third-party claims.
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