IRDAI has hiked third party motor insurance premium rates by 20%. In its draft proposal, IRDAI had proposed to hike third party motor premium rates by 108%. Third-party motor insurance is mandatory in India.
The new third party premium for private cars with engine capacity not exceeding 1000cc has gone up from Rs. 1,129 in FY 2014-15 to Rs.1,468 in FY 2015-16, a hike of 20%. Similarly, for engine capacity between 1000-1500cc the premium has increased from Rs.1,332 to Rs.1,598 and for engine capacity above 1500cc, the premium has gone up from Rs.4,109 to Rs.4,931.
In the two wheeler category, the revised premium for engine of 75-150cc has increased from Rs.464 to Rs.538. The insurance regulator has also hiked the premium on vehicles of 150-350cc to Rs.554. However, IRDAI has maintained status quo on vehicles exceeding 350cc.
Third party motor insurance rates
|
Third party tariff |
Old premium |
New premium |
Change |
|
Cars |
|||
|
Below 1000cc |
1229 |
1468 |
19% |
|
1000-1500cc |
1332 |
1598 |
20% |
|
Over 1500cc |
4109 |
4931 |
20% |
|
Two wheelers |
|||
|
75-150cc |
464 |
538 |
16% |
|
150-350cc |
462 |
554 |
20% |
|
Over 350 cc |
884 |
884 |
No change |
Source: IRDAI
The CEO of private general insurance company said, “The hike is inadequate for general insurers as loss ratio in motor insurance segment is still high. In fact, IRDAI knows it very well that non-life insurers are making heavy losses in motor insurance segment.”
Last month, IRDAI had come out with a draft regulation in which it has mandated non-life insurance companies to underwrite third party motor insurance. Non-life insurance companies, particularly, private insurers refuse to issue third party motor insurance and push comprehensive own damage cover to policyholders. Motor third party insurance cover is a loss making business for non-life insurers due to unsustainable premium tariff.
Incurred claim ratio or claims received by general insurers for the premium paid towards insurance policies 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 losses in this segment which can impact their growth.
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