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2011 (6) MLJ 321, 2011 (2) TNMAC 234
High Court of Judicature at Madras
K. CHANDRU
Erode District Bus Owners Association Rep. By its Secretary & Others
Versus
Insurance Regulatory and Development Authority, Rep. By its Chairman & Others
W.P.Nos.10908, 11844, 12262, 12267, 12332, 12388,12626, 12632, 12633, 12634, 12656, 12657, 12658, 12703, 12704, 12746, 12747, 12759, 12937, 12938, 12939, 13031 and 13144 of 2011 & M.P.Nos. 2, 3, 2, 3, 2, 3, 2, 2, 3, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 2, 1, 1, 1, 2, 2, 2, 1, 2, 3 & 2 of 2011
Decided on : 14-06-2011
Insurance Regulatory and Development Authority - Fixation of Motor Insurance Premium Rates - Insurance Regulatory and Development Authority Act, 1999 - Section 14(2)(i) - Summary: The court considered the challenge to the order issued by the Insurance Regulatory and Development Authority (IRDA) fixing the Motor Insurance Premium Rates for third party liability only cover. The court analyzed the provisions of the Insurance Act, 1938 and the IRDA Act, 1999, and the power of the IRDA to regulate and control the rates of insurance. The court found that the IRDA had the authority to control and regulate the rates in the absence of rates fixed by the Tariff Advisory Committee. The court also considered the consultation process held by the IRDA with various stakeholders and found that the process was in line with the judgment of the Supreme Court in Jt. Council of Bus Syndicate v. Union of India. The court rejected the contentions related to the fixation of premium for goods vehicles, the differential premium for passenger vehicles, and the lack of jurisdiction and wrongful procedure in not granting personal hearing. The court also dismissed the argument of double recovery of premium and held that the impugned order was based on rational classification and sound reasoning. The court further held that the petitioners were given eight weeks to pay the balance of the premium amounts to the respective insurers without fail. The writ petitions were dismissed with no order as to costs.
Fact of the Case:
The court considered a challenge to the order issued by the Insurance Regulatory and Development Authority (IRDA) fixing the Motor Insurance Premium Rates for third party liability only cover. The petitioners, including associations of bus operators, lorry operators, trade union of auto rickshaw drivers, and associations of matriculation schools, self-finance colleges, and deemed universities, contended that the fixation of premium rates by the IRDA was without jurisdiction, arbitrary, and violative of Article 14 of the Constitution as well as ultravires of the provisions of the Insurance Act, 1938.
Finding of the Court:
The court found that the IRDA had the authority to control and regulate the rates in the absence of rates fixed by the Tariff Advisory Committee. The court also found that the consultation process held by the IRDA with various stakeholders was in line with the judgment of the Supreme Court. The court rejected the contentions related to the fixation of premium for goods vehicles, the differential premium for passenger vehicles, and the lack of jurisdiction and wrongful procedure in not granting personal hearing. The court also dismissed the argument of double recovery of premium and held that the impugned order was based on rational classification and sound reasoning. The court further held that the petitioners were given eight weeks to pay the balance of the premium amounts to the respective insurers without fail.
Issues: The issues involved in the case included the jurisdiction of the IRDA to fix the Motor Insurance Premium Rates, the consultation process held by the IRDA, the differential premium for passenger vehicles, the lack of jurisdiction and wrongful procedure in not granting personal hearing, and the argument of double recovery of premium.
Ratio Decidendi: The court held that the IRDA had the authority to control and regulate the rates in the absence of rates fixed by the Tariff Advisory Committee. The court also found that the consultation process held by the IRDA with various stakeholders was in line with the judgment of the Supreme Court. The court rejected the contentions related to the fixation of premium for goods vehicles, the differential premium for passenger vehicles, and the lack of jurisdiction and wrongful procedure in not granting personal hearing. The court also dismissed the argument of double recovery of premium and held that the impugned order was based on rational classification and sound reasoning.
Final Decision: The court dismissed the writ petitions and gave the petitioners eight weeks to pay the balance of the premium amounts to the respective insurers without fail. There was no order as to costs.
1. All these matters came to be posted before this Court vide an order dated 7.6.2011 by the Hon'ble the Chief Justice. While W.P.No.13144 of 2011 was heard on 09.06.2011, all the other writ petitions were heard on 08.06.2011.
2. In all these writ petitions, the subject matter of the challenge is to the order, dated 15.4.2011 issued by the first respondent, i.e., Insurance Regulatory and Development Authority (for short IRDA) constituted under the Insurance Regulatory and Development Authority Act, 1999. By the impugned order, the IRDA had fixed the Motor Insurance Premium Rates for third party liability only cover. The petitioners in all these writ petitions were either associations of bus operators, lorry operators, trade union of Auto rickshaw drivers and associations of matriculation schools, self finance colleges and deemed universities.
3. The short question that arise for consideration in this batch of cases was whether the fixation of premium rates for third party liability by the IRDA was without jurisdiction and whether it is arbitrary and violative of Article 14 of the Constitution as well as ultravires of the provisions of the Insurance Act, 1938?
4. Before going into the contentions, it is necessary to refer to the impugned order in extenso for better appreciation of the facts involved in all these cases. The order reads as follows:
"The Authority refers to the Exposure Draft on Review of Motor Insurance Premium rates for Third Party Liability Cover dated 4th January 2011, which was published in its website. Subsequently on receiving responses on the exposure draft, the Authority held series of discussions with the Transporters' Associations and Insurers.
By virtue of the power vested in the Authority under Section 14(2)(i) of the IRDA Act, 1999, it is hereby notified that with effect from 25.04.2011, the rates of premium applicable to Motor Third Party Liability Insurance business shall be as set out in Annexure-I to this notification. The Authority has noted that Motor Third Party premiums were revised in the past at 4/5 year intervals. Such long intervals between rate revisions cast an avoidable strain on policyholders as well as on the insurance companies. Premiums need to be reviewed regularly depending upon the average claims which have been awarded by the various courts, frequency of claims for each class of vehicle and inflation amongst other factors. During the consultation process, certain stakeholders had also suggested that an annual review would ease the burden of adjusting to changes in premia consequent to changes in these financial parameters.
Having regard to the above, after extensive statistical analysis of data for all classes of vehicles, the Authority has arrived at a formula for the revision of rates based on settled parameters as set out in Annexure-II. The parameters built into the formula are (i) average claims cost for each class of vehicle (ii)frequency of claims for each class of vehicle and (iii)Cost Inflation Index for the year of review.
Based upon the formula as set out in the Annexure II, the premiums would be reviewed and adjusted annually.
Insurers are advised to be mindful of the concerned expressed by vehicle owners about both the rates and availability of insurance. Considering the mandatory nature of Motor Third Party Insurance, insurers are advised to ensure that Motor Third Party Insurance is made available at their underwriting offices and that requests for insurance are processed expeditiously and policies are issued promptly. The Authority will treat any complaint of non-availability of insurance or use of methods to deny/delay the client seeking insurance cover, seriously.
Insurers are not permitted to cancel the current insurance policies and issue fresh policies to effect new premium rates.
This Notification as well as the enclosed schedule of premium rates shall be prominently displayed on the Notice Board of every underwriting office of the Insurers where it c
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