The insurance regulator has proposed to hike third party premium to up to 108% for vehicles with engine capacity not exceeding 1000cc.
IRDAI has proposed a steep hike of up to 108% in motor third party premium rates for vehicles with engine capacity not exceeding 1000cc. The insurance regulator is expected to come out with the final circular on third party premium rates shortly. Third-party motor insurance is mandatory in India.
In a draft circular, IRDAI said, “It is observed that there is a high increase in average death claim size for the FY 2013-14 over the previous year, and the increase in average death claim size for the claims arising out of the policies issued in the years 2014-15 and 2015-16 is expected to be much higher.”
The new third party premium for private cars with engine capacity not exceeding 1000cc is proposed to rise from Rs.1,129 in FY 2014-15 to Rs.2,346 in FY 2015-16, a hike of 108%. Similarly, for engine capacity between 1000-1500cc the premium will go up from Rs.1,332 to Rs.1,920 and for engine capacity above 1500cc, the premium will go up from Rs.4,109 to Rs.5,292.
In the two wheeler category, the revised premium for engine of 75-150cc will go up from Rs.464 to Rs.538. The insurance regulator has also hiked the premium on vehicles of 150-350cc to Rs.609. However, IRDAI has proposed to decrease third party premium on vehicles exceeding 350cc to Rs.344 in FY 2015-16 as against Rs.884 in FY 2014-15.
Earlier, IRDAI had allowed general insurance companies to provide third party cover for a tenure of three years for two wheeler vehicles. However, the premium of such cover cannot exceed thrice the value of the annual premium. Also, the premium rate cannot be revised till the term of policy irrespective of IRDAI’s annual revision of motor third party premium.
Incurred claim ratio or claims received by general insurers for the premium paid towards insurance policies in a year in motor insurance segment (both third party and own damage) was 80% in FY 2013-14. Such a high incurred ratio indicates that non-life insurers are incurring hefty loss in this segment which can further affect their growth.