The IRDA has also fixed a formula for revising the motor insurance premium rates, which would be done after taking into account inflation and data on claim settlement. These rates are currently regulated by the Tariff Advisory Committee of the IRDA.
By virtue of the power vested in the Authority under Section 14(2) (i) of the IRDA Act, 1999, it is hereby notified that with effect from 25.04.2011, the rates of premium applicable to Motor Third Party Liability Insurance business shall be as set out in Annexure-I to this notification. The Authority has noted that Motor Third Party premiums were revised in the past at 4/5 year intervals. Such long intervals between rate revisions cast an avoidable strain on policyholders as well as on the insurance companies. Premiums need to be reviewed regularly depending upon the average claims which have been awarded by the various courts, frequency of claims for each class of vehicle and inflation amongst other factors. During the consultation process, certain stakeholders had also suggested that an annual review would ease the burden of adjusting to changes in premia consequent to changes in these financial parameters.
Having regard to the above, after extensive statistical analysis of data for all classes of vehicles, the Authority has arrived at a formula for the revision of rates based on settled parameters as set out in Annexure-II. The parameters built into the formula are i) average claims cost for each class of vehicle (ii) frequency of claims for each class of vehicle and (iii) Cost Inflation Index for the year of review.
