Govt reviews 18% hike in motor TP premiums amid widening losses and years of tariff freeze

Motor insurance may face a hike

Motorists across India may soon face a steep increase in the cost of mandatory third-party motor insurance of at least 18 percent, with a government decision on the matter expected by the first week of July.

For some vehicle segments, the increase could go as high as 25 percent, according to multiple sources familiar with the matter.

The Ministry of Road Transport and Highways (MoRTH) is currently reviewing a proposal from the Insurance Regulatory and Development Authority of India (IRDAI) submitted on June 6, 2025, to hike third-party (TP) motor insurance premiums by an average of 18 percent.

Once the ministry approves the proposal, a draft notification will be released for public consultation, after which the revised premiums are likely to be implemented in the upcoming quarter.

The proposed hike would mark the first revision in TP motor premiums in four years. Tariffs have remained unchanged since 2021, even as insurers continue to report rising claims and widening losses in the TP segment.

Official IRDAI data shows that after a major increase during FY13 to FY18, TP tariff revisions slowed dramatically from FY19 to FY24. Emkay Global reports that while there were modest increases of around 20–50 percent over seven years, several years, recorded no increase.

Meanwhile, insurers’ loss ratios have also escalated.

The net claims ratio for the TP segment stood at around 82 percent in both FY23 and FY24, while the ultimate loss ratio, factoring in all claims and reserve movements, rose from 88.3 percent in FY23 to 91.3 percent in FY24.

These numbers suggest that insurers have been spending nearly as much, or more, on claims than they collect in premiums.

This segment, which covers liability for injuries or damages to third parties in road accidents, is compulsory for all vehicle owners in India.

The rising costs of medical treatment, legal settlements, and vehicle repairs, have further strained insurers’ financials.