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Revised Rate of Third Party Car Insurance

Karen Menezes Karen Menezes 03 June 2016

Find out what is the revised rate for third-party car insurance. Learn how and why it is essential to know what the law mandates when it comes to third-party car insurance.

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The Insurance Regulatory and Development Authority (IRDA) of India has finally given in to the demands of the general insurance firms. The insurance regulator has recently issued this directive that would be in effect from April 2016. TS Vijayan, the Chairman of IRDA declared that the third party insurance premium for private cars that have less than 1000cc capacity engines will rise above Rs. 1,129.

The current rate for the same is Rs. 941. The revised premium for private cars with capacity more than 1000cc and below 1500cc is decided to be Rs. 1332, the earlier rate being Rs. 1,110. On the other hand, the cars having engine capacity more than 1500cc, the premium rate is revised to be Rs. 4,109 which earlier was Rs. 3,424.

In case of two wheelers that have less than 75cc engine the premium has increased from Rs. 414 to Rs. 455. 75cc-150cc engine capacity two wheelers premium has shot up to Rs. 464 from Rs. 422. For two wheelers over 150cc engine capacity but below 350cc, the new rate is Rs. 462. And for the ones above 350cc, the revised rate is Rs. 884.

It is surprising that in some cases the revised premium decided by the IRDA is lower than the initial amount that they had proposed. Also, they clarified that the policies in force cannot be cancelled by the insurers and the revised rates do not apply to ones who already hold policies.

A third party motor liability insurance protects one against any liability that can arise from the vehicle’s participation in a mishap that lead to death, injury or extensive damage of property of some third party. It gives you peace of mind and protection against unprecedented circumstances. In India, all private car companies provide third party insurance and one of the essential requirements when you go to book your car and seek for insurance policies.

This year, IRDA has hiked third party motor insurance premium rates by 40% compared to last year when it was only 20%. Though the third-party motor insurance is mandatory in our country, a major chunk of the vehicles are not insured.

Recently in Hyderabad, at the launch of an insurance company, the Telengana government revealed that out of 84 lac vehicles in the state, not even 50% of them is insured. The non-life insurance companies, the private ones in particular, are reluctant towards issuing third party motor insurance.

Their tendency is to push the comprehensive damage covers to policyholders. The unsustainable premium tariffs result in making motor third party insurance a loss making business, in general, for non-life insurers.

In the circular, however, IRDA has asked insurers to make sure that motor third party is available for them at the underwriting offices and throughout all channels of distribution available. The data showed by the insurance regulator says that there was some reason for insurers to be reassured in the motor insurance category.

The increase on the premium tariff of third party car insurance was of help to the non-life insurers. They could now limit their loss ratio in motor insurance segment. The motor insurance segment incurred 77% income ratio in FY 2014-15 as compared to 80% in 2013-14.

In simple words, incurred claim ratio is the claims received for the premium paid for insurance policies in a year. Therefore, a low incurred ratio is a marker of healthy growth opportunities and more profit in non-life business.

Karen Menezes
Written by Karen Menezes
An optimist at heart, Karen loves to see the world through a pair of rose-tinted glasses. An award-winning blogger, she loves to dream with her eyes open. Writing is not her passion, it’s an OCD! If at all she isn’t writing, you can find her shopping online or experimenting with DIY recipes.