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Third-party motor insurance premium hikes on expected lines: Insurers

Premium rates for third-party insurance of vehicles will increase across two-wheelers and private cars, except in the case of two-wheelers where engine capacity is more than 75 cc but not exceeding 150 cc, and also for electric two-wheelers where engine capacity is more than 3 KW but not exceeding 7 KW. In the last two categories, there will be reductions in rates.

Industry observers and analysts said the premium rate hikes, carried out after a gap of around three years due to Covid, are more or less on expected lines. The premium rates for vehicles’ third-party insurance will go up from June 1.

“The rates have been hiked as per the industry’s expectations. There was a draft notification for upward revisions of premium rates. So, we had a very good understanding of what is likely to be the final order. It is a cumulative increase, but not a big increase,” Sanjay Datta, chief – underwriting, claims and reinsurance, ICICI Lombard General Insurance, told FE.

Notably, insurance regulator Irdai (Insurance Regulatory and Development Authority) released a draft notification for the revision in premium rates for third-party motor insurance in March. Revision of third-party premium rates is initiated yearly by the Irdai. However, the activity was put on hold owing to Covid.

“It is a good thing that after three years, the new premium rates for third-party motor insurance have come up. It is a positive thing for general insurers. During the pandemic, a lot of vehicles were not plying, so it was not a good idea to increase rates at that point of time,” said TA Ramalingam, chief technical officer, Bajaj Allianz General Insurance.

“Discounts on premiums offered for educational vehicles, electric vehicles and electric hybrid vehicles are good measures,” Ramalingam told FE.

The ministry of road transport & highways (MoRTH), in consultation with Irdai, published the Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022 vide notifications dated May 25. A discount of 15% in premiums is provided for educational institution buses. A discount of about 15% and 7.5% on premium are allowed for electric and hybrid electric vehicles, respectively.

Since the process of upward revisions of premium rates was put on hold owing to Covid-19, a sharp revision was expected on the back of increasing loss ratios after the initial drop observed during the pandemic, said Abhilasha Singh, lead – partnerships, Riskcovry.

The increase in third-party (TP) premium rates will increase insurance premiums for comprehensive as well as third party policies, since TP insurance is a mandatory part of all motor policies in India, Singh added.

According to a gazette notification dated May 25 from the MoRTH, the annual rate of third-party insurance for private cars with up to 1,000 cc engine capacity has been increased to Rs 2,094 in 2022-23 from Rs 2,072 in 2019-20. Private cars with an engine capacity of more than 1,000 cc, up to 1,500 cc, will attract rates of Rs 3,416 compared with Rs 3,221, while owners of cars above 1,500 cc will see an increase in premium from Rs 7,890 to Rs 7,897.

Two-wheelers over 150 cc but not exceeding 350 cc will attract a premium of Rs 1,366, against Rs 1,193 in 2019-20, while two-wheelers exceeding 75 cc but not exceeding 150 cc will attract a premium of Rs 714 against Rs 752 earlier.

Premium rates for private electric cars with a battery capacity exceeding 30KW but not exceeding 65 KW have been increased from Rs 2,738 in 2019-20 to Rs 2,904 in 2022-23. Electric two-wheelers with a battery capacity exceeding 7KW but not exceeding 16KW will now have a third-party liability rate of Rs 1,161 against Rs 1,014 in 2019-20. Premium rates for electric two-wheelers with a battery capacity exceeding 3 KW but not exceeding 7 KW, however, have been decreased to Rs 607 from Rs 639 in 2019-20.

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