The Insurance Regulatory and Development Authority of India (IRDAI) has planned for a 50% hike in the insurance premium for cars, two-wheelers and commercial vehicles from April 1st 2017. The proposal has been forwarded to stakeholders inviting their comments up until March 18. Post that, the final revisions in premium will be put to affect from April 1, 2017. Since this proposal was majorly put forward for bigger cars, the third-party premium for smaller cars remains unaffected.
Why has the proposal being made for the price hike?
The rates of third-party premiums are analyzed and reviewed every year and then set-up based on inflation and incurred claim ratio. The IRDAI has been raising premiums every year since the last 5 years. Due to losses faced by car insurance companies, the IRDA projected to increase the third party premium rates over the two-wheelers and car insurance for this year too. The rise in service tax due to additional cess is another steep reason for the additional premium amounts.
For private cars
IRDAI further terms smaller cars as cars with cubic capacity of up to 1000cc. The current third-party premium for these cars is Rs.2,055. The 50% increase in motor insurance is basically for mid-segment cars (1,000 – 1500 cc) and bigger cars including the SUV types too. The current third-party premium for the cars up to 1,000cc but not exceeding 1500cc is Rs.2237 which tends to increase to Rs.3,355 from April 1st 2017. Also, for private cars exceeding 1500cc, the premium rate is proposed to increase from Rs.6,164 to Rs.9,246.
For commercial vehicles
IRDAI also proposed to increase the third-party premium for commercial vehicles by 50% from the current premium. For tractors up to 6HP, the regulator has planned to increase the premium from Rs.510 to Rs.765.
Fortunately, the third-party premium for two-wheelers having engines up to 75cc remains unaffected. The affected ones would be the ones having engines from 77-150cc for entry level bikes and 150-350cc for performance category bikes. The IRDAI has planned to increase the third-party premium from Rs.796 to Rs.1,194.
For Vintage cars
IRDAI shares a good news for vintage cars by proposing a discount of 25% on premium rates. To identify a car as vintage, the same needs to be certified by Vintage and Classic Car Club of India. For E-Rickshaw IRDAI has also projected to increase the third-party premium for e-rickshaws. IRDAI has invited stakeholders to comment till March 18th 2017 on the above draft exposure.