Third party motor insurance premiums to shoot up by up to 85 %

Third party motor insurance premiums in India will go up by up by 85 per cent with the Insurance Regulatory and Development Authority (IRDA) proposing an increase across various segments.

Under the latest revision, third party car insurance premiums for the entry level segment, which comprises vehicles with engines of below 1000 cc capacity, will see increases as steep as 85 per cent.

The 1,000 to 1,500 cc segment, which comprises models like Maruti Suzuki Swift, Ritz, Chevrolet Beat, Hyundai Santro and i10, will witness the lowest increase of 1.4 per cent.

Vehicles with engines of over 1,500 cc capacity will experience an increase of 43 per cent in their premium.

The entry-level segment, where the increase in third-party premium is the highest, is also the segment with most sales and the most number of first-time owners.

Third party insurance premium for commercial vehicles will also go up by 30 per cent.

Sources further said that the third party motor insurance is a mandate for all the vehicles, no matter private or commercial, as it covers the claim of injured party other than the car owner himself.

The IRDA move is reportedly aimed at compensating  insurance companies because of the increasing number of accidents and high amount of damage claims.

Meanwhile, insurance companies are also seeking an increase in own damages claimed as they expect a surge there as well.

Third party motor insurance premiums are cost inflation indexed as notified by CBDT, and their values are determined and notified by the IRDA in each financial year based on the experience measured in terms of average claim amounts, frequency and expenses involved in servicing the motor TP business, an IRDA release said.

The insurance sector regulator had reviewed and adjusted the premium rates for the FY 2012-13. It had also issued an exposure draft on 16 February 2013 on revision of premium rates for motor third party insurance premium rates for the year 2013-14 and invited comments/ objections on the proposed rates from all the stakeholders.

IRDA said the current notification is based on the responses received from stakeholders and on the basis of the wide variations in vehicle class and premiums charged at present.

Premium Rates for Motor Third Party Insurance Liability Only Cover – 2013-14
Percentage increase in motor third party premium rates for the different vehicle classes
S. No
Vehicle class
Increase as per exposure draft of 16.2.13 (%)
Increase as per order of 26.3.13 (%)
1
Private cars
38.87
20.00
2
Two wheelers
18.30
18.30
3
Goods carriers (other than 3 wheelers)
30.21
20.00
4
Private goods carriers (other than 3 wheelers)
11.02
0.00
5
Motorised 3-wheeler and pedal-cycle goods carriers
32.99
20.00
6
Motorised 3-wheelers and pedal cycles (private carriers)
9.90
9.90
7
Trailers
10.00
10.00
8
Four-wheeled vehicles with carrying capacity of up to 6 passengers for hire or reward
12.96
11.69
9
Three-wheelers with capacity of up to capacity of 6 passengers
11.34
0.00
10
Four or more wheeled vehicles with capacity exceeding 6 passengers for hire or reward
45.99
20.00
11
Three-wheelers with carrying capacity exceeding 17 passengers
45.99
20.00
12
Motorized three-wheelers with carrying capacity between 6and 17 passengers
11.34
0.00
13
Motorized two wheelers used for carrying passengers for hire or reward
26.43
20.00
14
Special types of vehicles
176.45
20.00
15
Motor trade (road transit risks)
41.75
20.00
16
Motor trade (road risks) (excluding motorised two-wheelers)–(eamed driver or trade certificate)
132.59
20.00
17
Motor trade (road risks) (motorised two-wheelers) – (named driver or trade certificate)
132.59
20.00

Source: IRDA

The overall percentage increase in the motor third party portfolio works out to 18.9 per cent. The above rates will be effective from 1 April 2013.