Premiums lost in compulsory motor third party liability (MTPL) business from uninsured two-wheelers is forecast to rise to INR520 billion (US$8.2 billion) in the fiscal year ending 31 March 2025 from INR56.41 million in FY2016, if the uninsured rate of 75% continued in the segment, according to the insurance regulator IRDAI.
"Post adjustment for inflation of 5%, this comes to around 80% of the entire motor insurance portfolio of 2015-16. The overall loss in premiums is much more if we account for premiums for own damage cover also," reported Times of India citing an article in the IRDAI's quarterly journal.
According to General Insurance Council of India, 60% of vehicles plying on Indian roads in FY2016 were uninsured. Most of the uninsured vehicles are two-wheelers and 75% of the total two-wheelers plying on Indian roads are uninsured.
Five states—Tamil Nadu, Maharashtra, Uttar Pradesh, Karnataka and Kerala—alone contribute almost 50% of the motor insurance policies whereas the remaining 24 states and seven Union territories contribute the remaining 50%.
Interestingly, the ICR (incurred claims ratio) for MTPL insurance of two-wheelers is the lowest among all classes of vehicles. It stood at below 68% for any of the years between FY2010 and FY2013.
The main reason for the poor insurance coverage is that the ticket size or premium per policy of two-wheelers for comprehensive as well as MTPL insurance is comparatively small. The median premium for MTPL of a two-wheeler is only INR804. "Thus, it requires greater effort (by insurers) to earn the same volume of premiums compared with other classes of vehicles, like cars etc," the regulator said.
"Distribution channels play an important role in renewal of business. Most of the new two-wheelers sold are insured through intermediaries who are tied to the two-wheeler showroom," it said. "After one or two years, most owners are not in touch with these showrooms as they go to local garages for servicing etc. For renewals after one year, not much effort is made by these distributors as they are happy with the captive and higher ticket size insurance," the IRDAI said.