Motor insurance premiums to be revised by IRDAI and will be effective right after election results.
With the buzz of elections in the air, India’s Insurance regulator IRDAI has sent out a proposal to increase the third party motor insurance premium rates from 10 to 20% on various categories of automobiles. This rise is to be effective immediately after the election and shall impact premium rates for cars, two wheelers, trucks and school buses too.
Reportedly, this revision proposed for cars is in excess of 14% and for two-wheelers, it is up to 21.11%. For public goods carriers i.e. trucks, there is an increase of over 11%. The increase that has been recommended for school buses is 5.29% in basic rate and 5.34% per licensed passenger.
This decision shall mostly hit the Indian auto sector aversely, as the industry has already been impacted by the high fuel hike and slowdown in the auto sales by 15% in the last few months.
However, it is said that there shall be no change in the long-term premium rates for cars and two-wheelers that are newly bought as such insurance cover is valid for three years in the case of new cars, and new two-wheelers have a cover of five years. While motor insurance premium rates are usually declared from April 1st each year, this year, they were not implemented immediately due to the Lok Sabha elections.
A major challenge here is that the Transport association is protesting against this hike as they claim that there is no data on which this 10% increase on truck's insurance premiums can be supported. They also stated that this rise shall lead to hike in freight charges by 3 to 4%.
Reportedly, Bal Malkit Singh, Chairman, All India Motor Transport Congress (AIMTC), said that “In the last 5 years, IRDAI has increased insurance, which has been opposed by transport industry. We need data, because this cannot be done on mere assumptions. Real time data is not available, and there are many other reasons like if cost increases then it should also be compensated from quarter."
Further, on Monday, The Insurance Regulatory and Development Authority of India (IRDAI) has issued a notification proposing to increase TP premium rates for cars below 1000 cc to Rs. 2,120 from the existing Rs. 1,850 for the financial year 2019-20. Also, for cars between 1,000 cc and 1,500 cc premium, an increase to Rs. 3,300 from the existing price of Rs. 2,863 has been proposed.