IRDA hikes rates for 'third-party' vehicle insurance
18 April 2011
In response to a long-standing demand from motor vehicle insurance providers, the Insurance Regulatory & Development Authority has decided to increase the premium for the compulsory 'third-party' cover by up to 68 per cent for commercial vehicles and by 10 per cent for cars and two-wheelers.
The new rates will be effective from 25 April.
This is just to start - if in any subsequent year claims paid by the insurers are more than the premium, the cost of the cover will go up in the subsequent year, IRDA said in a circular addressed to all insurers.
"Premiums need to be reviewed regularly depending upon the average claims which have been awarded by various courts, frequency of claims for each class of vehicle and inflation amongst other factors," the circular said.
Under Indian law, owners need not buy full insurance covering damage to their vehicles; but 'third party insurance' – which covers losses of life or limb suffered by the other party in a mishap – is mandatory. Many vehicle owners, especially commercial operators, go for this format, which so far has been much cheaper than comprehensive insurance.
The new rates will be based on parameters like average claims cost for each class of vehicle, frequency of claims for each class of vehicle, and cost inflation index for the year of review.