Mounting third-party claims in the motor business of insurance companies and losses being borne by the public sector alone, are forcing the central government to relook at the situation.

The government has issued notices to all insurance companies to settle all fresh claims within one month.

The Centre intends to force private insurance companies to take a share of this loss-making portfolio.

This was stated by Anand Rao V Adsul, minister of state finance (expenditure, banking and insurance), in Mumbai on Sunday.

The Centre is also considering a hike in insurance premium on third-party motor insurance, as well as ensuring that some quota of the business is given to the private players, said Adsul.

The minister added that with lakhs of claims pending for years, the government proposes to frame new rules and regulations.

"It is necessary to settle claims if the industry is to create faith and confidence in the minds of the public," said Adsul.

Every year claims of New India Assurance Company are rising by 12 per cent, said the company's chairman and managing director R Berry. "Even after settling claims, my amount increases," he added.

Insurance company officials pointed out that it is not the fault of insurance companies but rather the lawyers on behalf of their clients, who are postponing settlements.

"We are taking proactive steps to hasten the settlement of claims. However, claimants are being advised to go to court in the belief that they will get a larger settlement," said National Insurance Company manager M M Dutt.