Third party liability insurance, introduced for smooth functioning of the insurance industry, is indeed becoming a major hurdle in the profit growth of the non-life insurance industry. The situation should be considered seriously before it affects the industry very adversely.
Recently, the chairman of one of the private general insurance companies has commented that the unlimited third party claims permitted under the law on road accidents is threatening the viability of the general/non-life insurance industry. Statistics support this view. During the financial year 2002-03, the Motor Third Party Liability (TPL) losses were Rs. 3,500 cr and the claims ratio was as high as 250%, which means that for every inflow of Rs. 100 as premium, the outflow is Rs. 250 as compensation for a non-life insurance company. This indeed is an alarming situation as there are no willing takers of TPL insurance in the market, despite it being a compulsory coverage under the Motor Vehicle Act, 1988.
A road accident can devastate a family's finance, such that many may never recover. The owner has to bear the damage to the vehicle and liability to make good the loss to the victim, if any, for bodily injury and damage to property. In the motor insurance jargon, damage to the vehicle is called as Own Damage (OD) and liability to third party as Third Party Liability. TPL insurance indemnifies vehicle owners and drivers who are legally liable for personal injury to any other road user in the case of a motor vehicle accident. TPL insurance covers Third Party Damage to Property (TPDP) and Third Party Bodily Injury (TPBI).
The consequences to the victim are trauma, injury, and if he is employed, loss of earnings. He has to be compensated for injury, medical expenditure and loss of earnings. If the accident is fatal, the legal representatives lose their support and companionship. They have to be compensated for medical and funeral expenses, loss of consortium and loss of estate. These are liabilities under the law of torts (Civil Wrongs). |
