Since 2011, IRDAI, working with MoRTH, has been setting the premium rates for Third-Party Motor Insurance in India. The most recent premium rates set by IRDAI were given in the year 2021. That was 4 years ago – And it still has not been updated ever since.
However, speculations have been made that in the coming weeks, there might be an increase in Third-Party Automobile Insurance Premium Rates in India. How will this affect you, or what are the speculations and reasons behind the increase in premium rates? To know more, read along.
What is Third-Party Motor Insurance
A third-party motor insurance is a type of insurance policy that covers any damages that occur to a third party, i.e., an individual or their property, which is a result of an accident caused by the policyholder’s vehicle. If you wish to drive or ride on the public roads of India, you must have third-party motor insurance – states the Motor Vehicle Act 1988. Failing to carry one might lead to a hefty fine (Up to ₹4000) in India. This is the most basic form of motor insurance, mandatory to have.
Reason for the Increase in Third-Party Motor Insurance Premium
The Ministry of Road Transport and Highways (MoRTH) are looking into the proposal by IRDAI for increasing TP Motor Insurance Premium. Earlier in March 2025, it was reported in an investor call by the CEO and MD of ICICI Lombard, Sanjeev Mantri, hinted that there might be a rise in third-party motor insurance premium rates in the upcoming FY26. Here are the major reasons for the proposal for an increase in TP insurance premium rates:
1. Stagnant Premium Rates
The current third-party motor insurance premium rate was set in 2021. It’s been 4 years since it was updated. Insurers have started raising concerns and a need for regular revisions on premium rates to the IRDAI.
2. High Share of Third-party insurance than Own Damage motor insurance
Currently, 60% of motor insurance comprises third-party insurance. It contributes 19% of the general insurance in India. Own-Damage insurance makes the most profit for insurers, whereas third-party motor insurance has resulted in a loss for major insurers in India due to rising health costs.
3. Increasing Third-Party Loss Ratio For Insurers
Various sources indicate that major players in the insurance industry are experiencing an increase in third-party loss ratios, and some even claim that the claim settlement amount has outgrown the total third-party premium collected.
4. Rising Inflation
The rising healthcare and hospitalisation costs, legal fees, have also been proven to be one of the reasons behind IRDAI’s proposal.
5. High Vehicle Density on Road
With the rising population, there has been a significant increase in the vehicle density on Indian roads. More vehicles = Higher Risk of Accidents = Higher Third-Party Motor Insurance Claims.
Speculated New Third-Party Motor Insurance Premium Rates
Speculations have been made, and IRDAI reports indicate that there might be an increase of 18% in the third-party motor insurance premium rates. Some vehicle categories may even face a 20-25% increase. This table will showcase the speculated rates for different increments:
| Vehicle Type | Engine Capacity / Category | Current Premium (₹) | +18% (₹) | +23% (₹) | +25% (₹) |
|---|---|---|---|---|---|
| Private Two-Wheeler | Not exceeding 75 cc | ₹538 | ₹635 | ₹662 | ₹673 |
| Private Two-Wheeler | 76 cc – 150 cc | ₹714 | ₹842 | ₹879 | ₹893 |
| Private Two-Wheeler | 151 cc – 350 cc | ₹1,366 | ₹1,612 | ₹1,680 | ₹1,708 |
| Private Two-Wheeler | Above 350 cc | ₹2,804 | ₹3,309 | ₹3,449 | ₹3,505 |
| Private Car | Up to 1,000 cc | ₹2,094 | ₹2,471 | ₹2,576 | ₹2,618 |
| Private Car | 1,001 – 1,500 cc | ₹3,416 | ₹4,028 | ₹4,204 | ₹4,270 |
| Private Car | Above 1,500 cc | ₹7,897 | ₹9,320 | ₹9,718 | ₹9,871 |
| Commercial Goods | GVW ≤ 7,500 kg | ₹16,049 | ₹18,938 | ₹19,742 | ₹20,061 |
| Commercial Goods | 7,501 – 12,000 kg | ₹27,186 | ₹32,080 | ₹33,438 | ₹33,983 |
| Commercial Goods | 12,001 – 20,000 kg | ₹35,313 | ₹41,667 | ₹43,438 | ₹44,141 |
| Commercial Goods | > 20,000 kg | ₹43,531 | ₹51,367 | ₹53,543 | ₹54,414 |
*NOTE: These are speculative prices. Wait for the official notice from MoRTH for confirmed third-party motor insurance premium rates.
How Will an Increase in TP Motor Insurance Premium Affect you?
These third-party insurance premium hikes are speculated to come into operation for the FY26. Any car which is insured previously will follow the current premium rates till renewal. Any car that requires renewal of third-party motor insurance or buying a new car insurance policy will follow the new revised premium rates by IRDAI once it is approved by MoRTH. As of now, look out for any notification or announcement from MoRTH.
Summing Up
Third-party motor insurance premium rates are about to spike up by 18% (For some categories, 20-25%). Watch out for MoRTH announcements in the coming weeks for an official statement. Third-party motor insurance is important and mandatory. To get the best prices on car insurance and bike insurance, visit Coverfox. Stay informed, get insured and enjoy driving!
Frequently Asked Questions
Do I need to renew my third-party motor insurance as per the new rates?
If your policy has expired after the announcement of revised premium rates, you will have to pay the revised premium rates.
Does the increase in third-party motor insurance premiums affect all vehicles?
Yes, all vehicles are affected by the revised premium rates. Most vehicle categories are speculated to see an 18% rise, whereas some might see an increase of 20-25% in premium rates.
Is third-party motor insurance mandatory?
Yes, under the Motor Vehicle Act 1988, all vehicles on public roads of India must have at least third-party motor insurance to be able to drive legally.
When will the premium rates go up?
According to reports, a change in the premium rate will come into effect in FY26.
