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No price hike in third-party motor insurance, but comprehensive cover to be 10-15% costlier

Typically, premiums are revised by 10-40 percent depending on the type of vehicle and come into effect from April 1 of each year

March 29, 2019 / 02:39 PM IST
Car alarm system | Of course, most cars get this straight out of the box, but if you were on a tight budget and skipped out on the alarm system, maybe you shouldn’t have. Alarm systems are the first line of defence against theft as they start ringing as soon as something untoward happens with the car.

Car alarm system | Of course, most cars get this straight out of the box, but if you were on a tight budget and skipped out on the alarm system, maybe you shouldn’t have. Alarm systems are the first line of defence against theft as they start ringing as soon as something untoward happens with the car.

The pause in third-party motor insurance premiums may cheer vehicle owners. However, comprehensive motor insurance, which includes the third-party and own damage component, may still see a 10-15 percent increase as non-life insurers offsetting underwriting losses.

“We are reviewing rates and will have to increase total package rates to compensate for zero hike in the liability segment,” said the head of products at a large general insurance company. Insurers are allowed to price own damage component, while third-party premiums are fixed by the regulator.

Sources told Moneycontrol that non-life insurers have been impacted by the falling automobile sales which have impacted premiums, while claims remain high. The new package rates will be applicable from April 1 onwards.

Three year data

Graphics by Ritesh Presswala

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Motor insurance consists of the own damage and third-party insurance covers. Third-party insurance is mandatory, with premium being fixed by the regulator on an annual basis. In a stark departure this year, the Insurance Regulatory and Development Authority of India (IRDAI) said there will be no revision in premiums till further notice.

Typically, premiums are revised by 10-40 percent depending on the type of vehicle and come into effect from April 1 of each year. However, FY19 has already seen two premium hikes in April and September, respectively. This was because of a Supreme Court order that had made it mandatory to buy three-year car insurance and five-year bike insurance for third-party liabilities.

Subsequently, third-party premiums went up 2.86-3.08 times and 2.45-5.61 times for new cars and bikes purchased after this date, respectively. This not only pinched customer pockets but also led to an impact on vehicle sales from October 2018 onwards.

The underwriting losses of motor insurance portfolio are also set to be impacted because of the higher claims and inadequate premiums. This will impact profitability of the general insurance companies.



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M Saraswathy
first published: Mar 29, 2019 12:51 pm
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