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CAR INSURANCE

How Does Increase in Insurance Premiums Affect You?

Janhavi Shinde Janhavi Shinde 14 March 2017

IRDAI is increasing motor insurance premiums by 40%. Read on to understand the how, why and what of motor premiums being revised.

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Every year or so, Insurance Regulatory Development Authority of India revises premium rates for motor insurance.

If you haven’t read the newspaper, and have no idea what it means to you. Don’t worry! We’ll help you break down the new rule, and how it affects you for your next car insurance or bike insurance renewal.

The ruling and who’s behind it

IRDAI has planned for an up to 40 percent hike in insurance premium for cars, two-wheelers and commercial vehicles, with effect from April 1, 2017. The increase is only with respect to third-party premium rates, because these are the ones fixed by the insurance regulator.

IRDAI is the government body that regulates insurance in India. All rules on insurance products, companies, claims, grievances, brokerage etc are overseen by this body. Basically, they are the big daddy of insurance!

The following revised prices for car insurance will come into effect from April 1, 2017:

Vehicle TypePrice Until March 31stAfter April 1stPercentage increase
Private Cars- Not exceeding 1000 CC2,0552,0550%
Private Cars- Above 1000 CC but below 1500 CC2,2373,13240%
Private Cars- Above 1500 CC6,1648,63040%

These are the revised prices for two-wheeler insurance:

VEHICAL TYPEPrice Until March 31stAfter April 1stPercentage increase
Two Wheelers- Not exceeding 75 CC5695690%
Two Wheelers- Above 75 CC but below 150 CC61972016.32%
Two Wheelers- Above 150 CC but below 350 CC69397040%
Two Wheelers- Above 350 CC7961,11440%

Wait, what’s Third-party insurance?

Commonly known as TP policy, a third party cover protects you against any legal liability that might arise if your car / bike was to injure a third-person or their property in an accident. So, when your traffic cop says that having an insurance is mandatory for your car or bike, he refers to a TP policy.

Whether for bike or car, you buy a TP policy

  • Either as a standalone policy OR
  • As part of a package or comprehensive insurance policy.

The only difference: buying a TP policy as part of your comprehensive cover is better. You get coverage for your own car’s damages too: whether it’s during an accident or a broken windshield or a stolen bike!

Why to increase motor insurance premiums?

Like we said earlier, IRDAI decides the TP or third-party insurance rates. The premium for covering the damages to your vehicle [under a comprehensive policy] is based car insurance premium calculator which depends on your vehicle’s make and model. Which is why your neighbour’s 5-year-old Honda City has lower premium than your 2-year-old Honda City. ;)

Two reasons why IRDAI revises third-party premium rates:

  • Inflation, because when milk prices are increased every month, why not something as important as insurance. It’s fair.
  • Incurred claims ratio, which is the total number of claims filed for motor insurance in the previous year. Yes, IRDA analyses data from around the country! It works like this, you pay a small amount to your insurance company, so that they pay you back a large amount in case of accident or damages. Over that, IRDAI is very strict with insurance companies about not rejecting your motor insurance claims. But, too many claims in one year make IRDAI revise the premium rates, because even insurance companies need to cover up the losses. So, that’s a fair deal, right?

How can I save some cash?

Whether by 50% or less, insurance premiums will increase from April 1, 2017. So people with third-party only insurance and with comprehensive insurance, would have to pay more at the time of policy renewal.

Can you save some bucks? YES!

  1. If your car or bike insurance is due for renewal any time before May 15, 2017, you can actually renew it before March 31, 2017. You’d pay less than what you’d have paid after the price hike.

  2. What about your previous policy? Nothing happens. Your existing policy will expire on its due date and the new policy will start from that day onwards. You don’t lose any money, and your insurance cover remains intact.

  3. If your insurance policy hasn’t expired yet, you don’t have to go through inspections or paperwork. Whether it’s car or bike! Simply go online, and renew. At Coverfox.com, you can renew your bike insurance policy in 4 minutes and car insurance policy in 7 minutes. You have to test it to know it.

  4. If your car policy has expired already, then you shouldn’t waste a single second and renew on Coverfox.com immediately. We have an experienced team of expert advisors, who’d make sure that the whole process is super-fast with timely inspections.

  5. Did you know, expired bike policies don’t really need inspections?

Price hike over the years

In the past five years, IRDAI has consistently revised motor insurance premiums. To help you capture the trends, just follow the data points below:

Engine Capacity2016-172015-162014-15 2013-142012-13
Under 75cc569519455414350
Over 75cc to 150cc619538464422357
Over 150cc to 350CC693554462420355
Over 350CC796884884804680

Renewing Now!

We are smart consumers.

We queued outside ATMs at 11.50 in the night, when our Prime Minister announced demonetization.

We always queue outside petrol pumps, when the prices are announced to increase from the next day.

So, insurance premiums increasing are not that bad. You don’t have to stand in a queue or wait for long paperwork. Simply renew at the click of a button.

Note: This article was last edited on March 28, 2017, post IRDAI confirming the revisions on third-party insurance premium rates.

Janhavi Shinde
Written by Janhavi Shinde
Right from being a Flight Attendant to a Banker and now to a Content Writer, she has tasted success in all the fields. The kinda girl who loves pets and knows how to manage difficult people and events.