The Insurance Regulatory and Development Authority of India (Irdai) has proposed an increase of up to 50% in the third-party liability premiums of motor insurance. Revisiting the premiums is an annual exercise for the insurance industry. This is done mainly in an attempt to rein in the claims ratio, which is difficult to contain.
Claims ratio is the ratio of net claims to net premiums. So, the industry is currently paying more to settle third-party claims than what it is receiving for third-party insurance. And while the premiums go up each year, so do the claims.
Read on to know why it happens again and again and how it impacts you.