KATHMANDU, Jan 24: The Insurance Board is soon reducing premium rates on third-party insurance for private motorcycles and automobile to boost sales of these plans that come handy during fatal road accidents.
The third-party insurance policy was introduced by the insurance sector regulator in September 2009 to aid vehicle owners who cause damage to human life or properties in traffic accidents.
Under the policy, kin of every person killed in a road accident can claim up to Rs 500,000 in compensation, while those injured can legally demand up to Rs 200,000 to cover medical bills. Similar amount of compensation is also extended if vehicles cause damage to properties during road accidents.
These packages are currently being offered by all non-life insurance companies in the country at different rates. Motorcyclists, for instance, can purchase the plan by paying annual premium rate ranging from Rs 1,000 to Rs 1,400, while motorists are charged annual fee of Rs 3,000 to Rs 6,000.
“We have now decided to revise the tariff rates to boost sales of these policies, as not many private vehicle owners are enrolled in these plans,” a high-ranking official of the Board told Republica on condition of anonymity. “We are currently holding discussions with different stakeholders in this regard and are conducting studies to ensure the downward revision wont´ affect insurance companies.”
Although the Board has made it mandatory for all vehicle owners to purchase these plans, it has been found that many buy these policies only in the first year of purchasing a vehicle. This is because transport offices don´t register new vehicles until owners produce third-party insurance policies.
“But since they (transport office officials) don´t ask for these documents when vehicle owners renew registration of their vehicles, many don´t bother to buy the policy,” the official said.
Because of this oversight, the Board suspects almost 70 percent of motorcycles on the country´s streets are not covered by third-party policies. This is same with private vehicles, “as most of the owners think they are cautious drivers”.
To strictly enforce the plan, the Board had earlier floated the idea of mobilizing traffic police to conduct surprise inspection of these documents. Since the plan is yet to take off, the Board has decided to lower tariff rates for now to rope in more vehicle owners.
“We don´t think the downward revision of rates will affect insurance companies as private vehicle insurance business is most profitable among other automobile insurance businesses,” the official said.
He made the statement referring to a survey conducted recently by the Board which showed non-life insurance companies spent only 25.5 percent of the total premium collected from private vehicle owners in claim settlement in the 28-month period since September 1, 2009. In the case of motorcycle insurance, 56.4 percent of the premium collected was used for claim settlement purpose.