The Insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) has proposed to reduce third party premiums for FY19 in certain segments starting April 1. This reduction in the premium rates will encourage the vehicle owners to get the mandatory Third-Party Motor Insurance for their cars and bikes.
It will also provide insurers with an opportunity to come up with cheaper comprehensive insurance policies that provide financial assistance in case of an eventuality to the owner’s vehicle.
Third Party Insurance Rates for Two-Wheelers
IRDA’s new third-party premium rate is good news for riders who are riding two-wheelers with having less than 75 cc engine. The proposal made for the current cost of third-party premium has been reduced from Rs 569 to Rs 427. Under this scenarios, the consumers will now save Rs 142 this year. There is also a relief for other two-wheelers exceeding 75cc but not exceeding 150cc, the rates have not been proposed to change this year, it will still remain at Rs 569 only.
However, if you are riding a Bullet 500 or a Bajaj Dominar or any other bike of above 350cc, or any other two-wheeler exceeding 150cc but not exceeding 350cc, you have to pay a higher premium this year. The premium rates for this segment may increase to Rs 2323 for bike above 350cc and Rs 985 for two-wheeler exceeding 150cc but not exceeding 350cc which, as compared to last FY 18 stood at Rs 1019 and Rs 887 respectively. "Third party rates have gone up by roughly 20-40 percent in the past few years. This year’s draft regulation has proposed a change of 126 percent for 350cc and above segment, 10 percent for 150cc to 349cc while there would be a slight decrease or no change in other segments,” said Tarun Mathur- Director, Policybazaar.com.
Third Party Insurance Rates for Small Cars
The proposed premium rates for small cars not exceeding 1000cc, falling between 1000cc to 1500cc and exceeding 1500cc has been revised to Rs 1850, Rs 2863 and Rs 7890 respectively, which have been kept lower for small cars not exceeding 1000cc only. However, other rates remain the same this year as for last year’s rates. The premium rates for last FY 18 stood at Rs 2055, Rs 2863, Rs 7890 respectively.
“This is a good move by IRDAI as for the owners of small cars, it will be a slight relief in their pockets. But simultaneous proposal on the increase in premium amount for bikes with heavy engine capacity will definitely upset the buyers. Lowering the premium amount rate should motivate a car buyer and it will also raise the awareness about the importance of insurance,” said Naval Goel CEO & founder of PolicyX.com
Devendra Rane, Founder & CTO - Coverfox.com said that till now the vehicle owners were already reeling under the constant increase of Third-Party Insurance rates year-on-year. Also, with the implementation of GST, the tax rates were increased from 15% to 18%. This increase of 3% contributed towards a higher total premium payable by the consumers.
“The year-on-year increase in the third party motor insurance premium rates clubbed with the increased GST rates have been putting off vehicles owners, especially in tier 2 and 3 cities and other rural areas from covering their vehicles with the mandatory Third Party Insurance,” he added further.
Third Party Insurance Rates for Taxis
If you own a commercial vehicle, the proposed rates for taxis not exceeding 1000c, falling between 1000cc to 1500cc and exceeding 1500cc stands at Rs 5437, Rs 7147 and Rs 9472 respectively, which have been kept at a lower rate this year compared to last year’s rates. The premiums for last FY 18 stood at Rs 6396, Rs 8408, Rs 11144 respectively.
There is a significant decrease in premium for taxis and low-segment cars and bikes which is a welcome relief for a significant individual-customer segment. IRDAI revises the rates every year based on claim experience in the past and we hope the lower rates are in line with the lower claim risk for these segments.
Biresh Giri, Appointed Actuary, Acko said that for most other segments the premium has been kept flat this year after increasing every year for the past 4-5 years. This will also come as a good news for the customers. For some small segments such as high-end bikes and some segments of goods carrying vehicles the premium is proposed to be increased which might be because of higher claims for these segments.
“The IRDAI’s role has been commendable in slowly and steadily increasing the Motor Third-Party premium rates over the past couple of years where it has now reached a level which is acceptable to customers and more sustainable for insurers,” he said.
However, these are only proposed rates for comments from the industry and the final roll-out is expected by the end of March.