Plea to withdraw service tax on third party insurance
January, 05th 2007
To mitigate the burden of motor vehicle owners from the recent third party premium hike, the General Insurance Officers All India Association (GIOAIA) has asked the Union Government to withdraw service tax on insurance premium. The service tax rate that started at 5 per cent has now become 12.24 per cent.
Mr P.P. Mohanan, State Vice-President of the Association, has urged the Centre and PSU general insurers to enlighten the public and policy holders regarding the circumstances that has led to the third party premium hike. "The premium hike was inevitable as the third party claim ratio is 250 per cent," he pointed out.
Since the third party premium was unattractive, the burden of loss-making third party insurance was mainly on the four public sector general insurance companies alone. If the freedom to fix third party insurance premium was given to insurance companies, the premium amount will be much more due to the high claim ratio, the Association said.
As per the new system, all third party motor insurance premium and claims will be managed by the Indian Motor Insurance Pool, which will be controlled by the General Insurance Corporation of India. The third party claim loss amount is to be shared by the 13 non-life insurance companies, according to their market share.
As a result of de-tariffing, premium rates will be reduced in profit making segments like fire and engineering. Insurance Regulatory and Development Authority has allowed a maximum reduction of 20 per cent on fire and engineering, and 10 per cent on motor `own damage' portions, a press release issued here has said.