No cover notes, no impact on vehicle owners
The recent directive by the central government to its four non-life insurance companies not to issue cover notes for third party motor insurance policies to avoid possibility of fraud will not affect vehicle owners, a senior official said Saturday.
"The government directive will not affect customers as we have stopped issuance of cover notes (temporary policy document issued till the policy is made ready) in a major way long back. The facility is offered only for selected customers based on their past experience," said a senior official of the United India Insurance Company Ltd, who requested anonymity.
Cover notes are not being issued for motor vehicles for a long time, said an official at the National Insurance Company Ltd, also a company owned by the central government.
The Department of Financial Services under Ministry of Finance wrote Oct 30 to the head honchos of four non-life insurers - National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd and United India Insurance Company Ltd - asking them to stop issuing cover notes for motor third party insurance.
The government also directed the companies to take all necessary steps for negotiated settlement of motor third party claims.
"The private insurance companies should also participate in this process," the letter notes.
The government also asked the chairman and managing directors (CMD) of its four non-life insurance companies to identify fraud-prone areas in respect of motor third party claims and undertake necessary steps to manage the same.
"The nature of frauds to be classified and data for the same should be shared by the complete general (non-life) insurance sector," the government's directive notes.
Officials of the United India and National Insurance companies told IANS that cover notes are issued only for new vehicles and by vehicle dealers against advance cash deposit.
"All the vehicle dealer sold policies are comprehensive ones and not third party policies. Cover notes for renewal of a policy and for individuals are not issued," a National Insurance official told IANS.
Welcoming the government's idea of data sharing, Amarnath Ananthanarayanan, CEO and managing director, Bharti Axa General Insurance Company, told IANS: "Once the data is shared, mapping of the fraud-prone region will be easy."
According to him, all the non-life insurers have to look at minimising their third party claims outgo and prevent fraudulent claims, as it will have an impact on their bottomline.
"Private sector non-life insurers including Bharti Axa General are already going in for negotiated settlement of third party claims," Ananthanarayanan said.
"Motor third party claim settlement is an industry by itself with an estimated annual payout of Rs.15,000 crore. It involves various stake holders like the vehicle owners, victims and their families, the police, ambulance chasers, lawyers, insurance companies, banks and claims tribunals. The stakes are huge and it is not an easy industry to manage. Major legislative changes and their implementation will be required to contain this "growing" industry," K.K. Srinivasan, former member of Insurance Regulatory and Development Authority (IRDA) told IANS.
He said that notwithstanding its noble intentions, the government, of itself, can have very little impact on this mammoth industry.