The mandatory motor third-party insurance for your vehicle will cost 5 to 15 per cent more from next month. The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a hike of over 5 per cent to 15 per cent in the premium of mandatory motor third-party insurance from April 1.

According to the draft circular, the proposed third-party premium rates for various classes of vehicles will go up based on the class of vehicles. For private cars not exceeding 1,000 cc, the premium rate has been proposed at ₹2,182 for FY21 against the existing rate of ₹2,072 for FY20.

The proposed hike for cars of 1,000 cc to 1,500 cc has been pegged at ₹3,383 (₹3,221), while the premium for cars that exceed 1,500cc will remain at ₹7,890. For two-wheelers, a 5 per cent hike has been mooted across all categories.

For public goods-carrying vehicles (other than three-wheelers) that do not exceed 7,500 kg, the proposed revised premium is ₹16,092 (₹15,746).

For those between 7,500 kg and 12,000 kg, it is ₹28,288 (₹26,935), while for those in the range of 12,000 kg to 20,000 kg, the premium will be ₹35,139 (₹33,418).

Electric vehicles

The proposed hike of 15 per cent for long-term three-year single premium is applicable for some categories of electric vehicles. For example, for vehicles that do not exceed 30 KW, the rate is proposed to be revised from ₹4,493 to ₹5,167. According to Subramanyam Brahmajosyula, Head, Underwriting and Reinsurance, SBI General Insurance Company Limited, the proposed new rates “represent a fair deal for both parties”.

A fair deal?

As the proposed rates are the outcome of extensive data analysis by the regulator, it can be assumed that the proposed hike is adequate.

“However, in the past, it has been observed that increase in TP premium had not kept pace with claims outgo for insurance companies and it remains to be seen if things will be different this time,” he told BusinessLine.

However, the chief executive of a leading private general insurer said that given the recent steady increase in claims, a hike of 5 per cent for the most popular class of vehicles “falls below the expectations of the industry”.

Claims data for eight years have been considered and the final rates have been arrived at by using actuarial methods to calculate claims costs and with appropriate loading for expenses.

For private cars not exceeding 1,000 cc, the premium rate has been proposed at ₹2,182 for FY21 against the existing rate of ₹2,072 for FY20