The premium for third-party motor insurance cover that provides protection against damage, injury, death of a third person, and/or damage to his/her property caused by your vehicle has recently got a steep jump. The effective rate announced by the Insurance Regulatory and Development Authority of India (IRDAI,) has been effective from 1st April this year.
A typical motor insurance policy has two types
Damage to Own Vehicle
This, of course, provides cover for damage to your vehicle. According to the current law, insurance companies have the freedom to determine the premium for the same. However, the insurance regulator has not made this ‘own-damage cover’ a compulsory cover.
Third-Party Cover
This type of vehicle insurance policy covers the injury/death of a third person and/or damage to his/her property caused by your vehicle. The premium for this cover is decided by IRDAI making third-party cover mandatory.
The regulator takes into account various factors to arrive at a suitable third-party insurance premium for a variety of vehicles. It includes the frequency of claims you made during the previous year, average claim amount, the expenditure involved in servicing the policy and cost inflation index, etc.
In accordance with that, the regulator has announced the new premium rates with effect from 1st April 2015. For the third-party insurance cover, premium rates will apply as follows:
| Engine Capacity | Previous Premium | Revised Premium |
|---|---|---|
| Private vehicle with engine capacity up to 1000Cc | Rs.1129 | Rs.1468 |
| Private vehicle with engine capacity from 1000Cc to 1500Cc | Rs. 1332 | Rs. 1598 |
| Private vehicle with engine capacity above 1500Cc: | Rs. 4109 | Rs. 4931 |
| For two-wheeler with engine capacity up to 75Cc | Rs. 455 | Rs.519 |
| For two-wheeler with engine capacity from 75Cc to 150Cc | Rs. 464 | Rs. 538 |
| For two-wheeler with engine capacity from 150Cc to 350Cc | Rs. 554 | Rs. 462 |
| For two-wheeler with engine capacity above 350Cc | No change | Rs.884 |
This increment reflects an overall increase of 30% for small cars and 20% for medium to large cars. The previous year, the increment in premium rates of car insurance was about 20 percent across all engine types.
While for two-wheelers insurance this raise in premium rates ranges from 14% to 20%. For the previous year, this was around 10 percent.
The logic behind such a huge raise in the third-party premium rates year after year is the huge losses that the insurers suffer on account of third-party insurance claims.