Car, bike owners, alert! Centre proposes hike in third-party motor insurance premiums

The proposed hike in the vehicle insurance premium rates will be applicable from April 2022.

New Delhi: The Ministry of Road Transport and Highways, on Friday (March 4), came out with a draft notification that proposes revising the premium for third party motor insurances.

The proposed hike in the vehicle insurance premium rates will be applicable from the financial year 2022-23. However, two-wheeler and private car owners could benefit from the hike in third-party motor insurances, as there is a slight dip in the premiums to be paid by them.  

On the other, taxi, truck and bus owners will have to loosen their purse strings for buying third-party motor insurance. The government also proposed a discount of 15 per cent on the insurance premium for electric vehicles (EVs). Hybrid electric vehicle owners can also avail of a 7.5 per cent discount on the purchase of third-party motor insurance.  

"There is very little justification for the hike. The provision made against the claims are increasing, but not the actual claims payout. The formula-based premium increase needs to be relooked," K.K. Srinivasan, former member (non-life) of Insurance Regulatory and Development Authority of India (IRDAI), told IANS.

Moreover, two-wheelers with a capacity between 75cc and 150cc will pay lower a rate of Rs 714 per year (Rs 752 with taxes). In contrast, there has been an increase in the premiums of other classes of two-wheelers.

The proposed hike in third-party motor insurances has come after several general insurers had pointed out that they are incurring huge losses under the motor insurance portfolio. 

However, reports by industry lobby General Insurance Council and the Insurance Information Bureau of India (IIB) signal otherwise, according to an IANS report. Also Read: 7th Pay Commission: State govt increases dearness allowance of employees, check details

The Indian Non-Life Industry Year Book 2019-20 had noted that the total motor insurance premium earned by the industry for 2019-20 was Rs 68,951 crore. However, the claims paid for 2019-20 was Rs 38,071 crore, which includes claims towards damage to vehicle at Rs 20,552 crore and third party liability at Rs 17,519 crore. This means that the gross surplus stood at a whopping Rs 30,880 crore. Also Read: Ukraine president spoke to Elon Musk, will get more Starlink internet terminals