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Motor insurance: Third-party cover gets costlier; new rates come into effect from June 16

Saikat Neogi
Motor insurance, Irdai, Bajaj Allianz General Insurance, Electric vehicles, long term premiums

From June 16, the premium for mandatory third-party liability insurance for private cars up to 1000 cc will increase by 12% from Rs 1,850 to Rs 2,072, and for those above 1000 cc but less than 1500 cc, the rise will be 12.5% to Rs 3,221. For two-wheelers, the increase will range between 4% to 21%. However, the premium of long-term cover remains unchanged.

There will be no change in the third-party premium rate for private cars above 1500 cc. There will be no changes in the rate for two-wheelers with engine capacity above 350 cc. The Insurance Regulatory and Development Authority of India (Irdai) has notified the new rates this week after seeking comments on the exposure draft on May 20, 2019. The final cost of premium is lower than the proposed rates in the draft exposure.

Since 2011, the rates for third-party insurance have been fixed every year by Irdai and notified in the last week of March. The rates become effective from April 1. But this year, in a circular issued on March 28, Irdai did not revise the rates. But now, the insurance regulator has revised the rates for 2019-20.

Gurneesh Khurana, president and business head, Motor, Bajaj Allianz General Insurance, says the new third-party rates have been quite customer-centric and keeping in mind the developments in the automobile industry. The rates for long-term policies for new private vehicles have been kept the same. While this is a positive move for the private car industry which is going through a demand stress period, the insurance industry shall have challenges in terms of higher loss ratios due to inflation and claim cost, he says.

Sajja Praveen Chowdary, business head, Motor Insurance,, says that the revison in third-party rates by the regulator is very well-aligned with the overall ecosystem. This time they have categorised the buses into school buses and other buses along with a new segment for electric vehicles in private cars and two-wheelers, which is a wonderful move towards a sustainable environment, he says.

Electric vehicles

In the draft exposure, the regulator had also proposed a 15% discount on the premiums for electric vehicles. In case of a one-year policy for electric private cars not exceeding 30 kilowatt, the premium has been fixed at Rs 1,761, for those between 30 kilowatt and 65 kw the premium is set at Rs 2, 738, and for those exceeding 65 kilowatt the premium is Rs 6,707.

For a long-term cover, the premium will be Rs 4,493 for for electric private cars not exceeding 30 kilowatt, Rs 8,104 for those between 30 kilowatt and 65 kw, and for those exceeding 65 kilowatt the premium has been fixed at Rs 20,659.
Long-term covers

After the Supreme Court s ruling last year making third-party insurance mandatory for all vehicles plying on Indian roads, Irdai had made it mandatory for all vehicles bought after September 1 to purchase long-term premiums. The cover will be for three years in case of private cars and five years for two-wheelers. Vehicles bought before September 2018 follow annual premium.

Experts say the long-term covers will be cost-effective in the long-run. In case of private cars below 1000 cc, the rate has been fixed at Rs 5,286. For those between 1000 cc and 1500 cc, the premium will be Rs 9,534 and those over 1500 cc, the premium will be Rs 24,305.