Third-party motor insurance hike less steep than expected

The Insurance Regulatory & Development Authority (IRDA) today limited the hike in premium for third-party motor insurance to 9-20 per cent, against a proposal seeking a hike in the range of 20 to 137 per cent.

However, the comprehensive motor cover premium that comprises motor own damage (OD) and motor third-party (TP) cover might be up by at least 30 per cent, since general insurers are planning to raise motor OD premiums.

According to the regulator's decision, the private car category will see a motor TP rise between 19 and 20 per cent across different categories, including below 1,000 cc (like Alto, Nano), 1,000-1,500 cc and exceeding 1,500 cc.

Similarly, in the two-wheeler category, premiums in TP segment have been hiked only by 9-10 per cent as against the proposed 1-45 per cent hike across different categories of below 75 cc, 75-150 cc, 150-350 cc and exceeding 350 cc.

In motor insurance, TP cover, which covers the liability to a third party during a motor accident, is mandatory, while the OD cover that protects the individual from accidents is optional.

For goods carrying vehicles, private carriers (other than three-wheelers), motorised two-wheelers used for carrying passengers for hire and motor trade (road risks), IRDA has decided to moderate the rate reductions.

In four or more wheeled vehicles used for carrying passengers with carrying capacity exceeding six passengers for hire, three-wheeled passenger vehicles used for carrying passengers for hire with capacity exceeding 17 people, IRDA has decided not to change the current rates.

For the taxi segment (four-wheelers) too, as opposed to a TP premium hike of 144 per cent, only 19-20 per cent hike has been decided upon. Similarly, for the auto-rickshaws (three wheeled vehicles carrying passengers not exceeding six), there is a 10 per cent hike in motor TP premium as against the proposed 27 per cent.

In February, the IRDA in its exposure draft had proposed a steep rise in premiums for 2014-15. In the exposure draft on revision in premium rates for motor third-party (TP) insurance covers for 2014-15, IRDA proposed an increase of 25-137 per cent for private cars and 1-45 per cent for two-wheelers (See: Third-party motor insurance premiums to skyrocket).

General insurance executives had sent a representation to the regulator to consider an increase of 50-60 per cent in motor TP premiums, in view of the rise in loss ratios in the segment.

The commercial vehicle segment has been a constant cause of concern in the motor segment, due to which insurers have sought steep hike in overall TP premiums.