Japan would like to hear explanations on the following points on "(c) making the underwriting of third party risks concerning motor vehicles obligatory".
(1) The aim/purpose of this regulatory change.
(2) The point the discussions have reached and their future progress.
Reply: Currently motor third party insurance is mandatory for any vehicle that is to be driven on the road. The premium rate for this insurance is mandated by the regulatory authority.
It was observed that the premium rates charged were not adequate to cover the cost of claims. The insurance companies were therefore reluctant to underwrite this line of business resulting in commercial motor vehicle owners not getting insurance covers. In order to overcome this difficulty the regulatory authority created a pool mechanism for the third party risks of commercial vehicles. While the supply side issues of motor third party insurance were removed by the creation of the pool, the issues on the demand side (premium adequacy) still remained. In order to overcome the motor third party pool deficit, the insurance amendment bill proposes to make it mandatory for non life insurers to write a certain percentage of their total business as motor third party insurance. This will enable the insurers to exercise better control over the business they underwrite and be responsible for the quality of risks they accept. The regulatory authority will issue regulations in this regard once the insurance amendment bill is passed.
