Page 323 - Motor Insurance Ebook IC 72

Guide for Motor Insurance

unknown component of the premium and has to be
ascertained by statistical methods.

The erstwhile tariff provided for three main
classifications of the vehicles and sub-classifications
in each class, (these classifications continue to be
followed at present) it follows that statistics of premium
and claims should also be maintained and collated on
the same basis. The nature of the cover provided is
also relevant as different rates are provided for Own
damage and Act only covers. This factor should be
incorporated in the statistical structure.

Interpretation of statistics is as important as collation.
For example the claims cost reflect not only the paid
claims but also outstanding claims. But there is a long
gap in settlement of motor claims, especially third party
claims. This delay would mean that the true claims
cost would be evident only after 3-4 years. Therefore,
it is essential that an effective system to place proper
estimates on outstanding claim be devised.

Once the claims cost is known, it is possible to develop
incurred claim to premium in each classification to
consider effecting appropriate underwriting measures
by the Companies and rate revisions (upward or
downwards) by the them.

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