The new rates will be effective from April 1, 2014.
IRDA has announced a marginal hike in third party motor premium rates, in sharp contrast to its draft circular in which IRDA had proposed a steep hike of 25-137% in private cars and 1-45% in two wheelers in third party motor premium.
The new rates will be applicable from April 1, 2014.
The CEO of a mid-sized general insurance company told Cafemutual that the Finance Ministry has asked IRDA not to make any steep hike in premiums in view of the coming elections. However, in a circular, IRDA has said that the decision to moderately hike the rates was due to consumer dissatisfaction with the draft proposal.
IRDA has said, “It is observed that the estimated premium rate increase over the previous year in some of the vehicle classes is much higher. At the same time, some vehicle classes are showing negative change. Looking into the sudden and adverse impact on the policyholders of such an increase in rates and considering comments on the exposure draft, the regulator decided to moderate the rate hike.”
R Chandrasekaran, Secretary General, General Insurance Council (GIC) said, “Similar to last year, this year the hike is inadequate for general insurers since loss ratio in motor insurance segment is still high. In fact, IRDA knows it very well that non-life insurers are making heavy loss in motor insurance segment.” General Insurance Council has regularly conveyed to IRDA that the current premium rates are inadequate and revision in rates matching ultimate liability levels is required.
Incurred claim ratio or claims received by the general insurer for the premium paid towards insurance policies in a year in motor insurance segment (both third party and own damage) was 87% in FY 2012-13. Such a high incurred ratio indicates that non-life insurers incurring hefty loss in this segment which will further affect their growth.
The new third party premium for private cars with engine capacity not exceeding 1000cc will rise to Rs. 1129 in FY 2014-15 as against Rs. 941 in FY 2013-14. Similarly, for engine capacity between 1000-1500cc and above, the third party premium will go up from Rs 1,110 to Rs. 1,132 and from Rs. 3,424 to Rs. 4,109 respectively. In draft proposal, IRDA proposed a higher premium of Rs. 1,167 (For 1000-1500cc) and Rs. 4,295 (above 1500cc).
In two wheeler category, the revised premium for engine of 75-150cc will go up from Rs. 422 to Rs. 464. The insurance regulator has also hiked the premium on vehicles of 350 cc and above to Rs. 884 from Rs. 804. Click here for information on third party premium rates of other vehicle categories.