IRDA to Increase Third-Party Motor Insurance Premiums

IRDA to Increase Third-Party Motor Insurance Premiums Premium for third-party motor insurance cover that provides protection against damage, injury, death of a third person and/or damage to his/her property caused by your vehicle has recently got a steep jump. The effective rate announced by the Insurance Regulatory and Development Authority of India (IRDAI,) has been effective from 1st April this year.

A typical Car insurance policy has two types – (1) Damage to Own Vehicle, and (2) Third-party Cover.

Damage to Own Vehicle – This is, of course, provide cover for damage to your vehicle. According to the current law, the insurance companies have the freedom to determine the premium for the same. However, the insurance regulator has not made this ‘owndamage cover’ a compulsory cover.

Third-party Cover – This type of your vehicle insurance policy covers injury/death of a third person and/or damage to his/her

property caused by your vehicle. The premium for this cover is decided by IRDAI making ‘third-party cover’ mandatory.

The regulator takes into account various factors to arrive at a suitable third-party insurance premium for variety of vehicles. It includes frequency of claims you made during previous year, average claim amount, expenditure involved in servicing the policy and cost inflation index etc.

In accordance with that, the regulator has announced the new premium rates with effect from 1st April, 2015. For the third-party insurance cover, premium rates will apply as follows: Private vehicle with engine capacity up to 1000Cc: Rs.1468; earlier it was Rs.1129 Private vehicle with engine capacity from 1000Cc to 1500Cc: Rs. 1598; earlier it was Rs. 1332 Private vehicle with engine capacity above 1500Cc: Rs. 4931; earlier it was Rs. 4109 For two-wheeler with engine capacity up to 75Cc : Rs.519; earlier it was Rs. 455 For two-wheeler with engine capacity from 75Cc to 150Cc : Rs. 538; earlier it was Rs. 464 For two-wheeler with engine capacity from 150Cc to 350Cc : Rs. 554; earlier it was Rs. 462 For two-wheeler with engine capacity above 350Cc : Rs.884; No change This increment reflects an overall increase of 30 per cent for small cars and 20 per cent for medium to large cars. Previous year, the increment in premium rates was about 20 per cent across the all engine types.

While for two-wheelers this raise in premium rates ranges from 14 per cent to 20 per cent. For previous year, this was around 10 per cent.

The logic behind such huge raise in the third-party premium rates year after year, is the huge losses that the insurers suffer on account of third party insurance claims.