Chennai, Oct 10 (IANS): Devising a long-term third-party motor insurance policy, coterminous with the validity period of a vehicle's life tax, is not possible owing to varying compensation awards given to accident victims, an insurance official says.

The Motor Vehicles Act is proposed to be amended and one of the provisions is the capping of the vehicle owners' liability to an accident victim at Rs 10 lakh.

Currently, the vehicle owner's liability is unlimited. Since third party insurance is mandatory, the burden of the paying compensation to the accident victim is passed on to the insurers by the vehicle owners by taking an insurance policy.

One of the standard complaints of the Indian non-life insurers is that majority of the vehicles in the country are plying without the mandated third-party insurance policy.

"Vehicle owners take out an insurance policy at the time of the vehicle purchase, as it is mandatory for getting the registration number, and do not renew the policy on its expiry," a senior official of a government-owned insurance company not wanting to be quoted told IANS.

"The Motor Vehicle (Amendment) Bill provides for the liability limit to be revised by the government from time to time. The current trend of accident incidences is increasing as the awards are also on the rise due to increase in incomes and other factors," R. Chandrasekaran, Secretary General, General Insurance Council, told IANS.

"This would not give the industry the leverage to safely predict future outgo (quantum of losses) in this segment to decide the cost of insurance of such a product, which would be coterminous with life tax for vehicles (15 years in case of private cars and two-wheelers)," Chandrasekaran added.

According to him, currently some companies have launched three-year third-party policies for two-wheelers and are deliberating on a five-year third-party policies.

He said the industry earned a gross direct premium Rs 17,947 crore in 2014-15 and Rs 21,242 crore for 2015-16. The total amount of claims paid and outstanding for 2014-15 and 2015-16 stands at Rs 38,584 crore and Rs 33,641 crore, respectively.

While the non-life insurers clamour for regular hike in third-party insurance premium, a senior official of an insurance broking firm told IANS on the condition of anonymity that private insurers are offering rebates on the third party insurance premium to rope in policyholders.

"Rebating in own damage premium (premium charged for covering damage to vehicle due to accidents), insurers fix their own damage premium rates. But rebating third-party insurance premium cannot be allowed by the regulator, as the risk, premium and the liability are mandated," he added.

Questioning the rationale for regular hikes in the third-party insurance, a senior actuary not wanting to be quoted told IANS: "There is a need to examine whether the provisions are overstated, so as to make the incurred claim look too high."

"The overstatement of incurred claims only helps the insurer and adversely affects other stakeholders in the game. Of course, the policyholders, who do not make a claim -- they constitute the largest number -- will be adversely affected because the premium for the next year will go up for no fault of theirs," he added.