Third-Party Liability Motor Insurance Premium For 2018-19

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed changes to the third-party liability premium for motor insurance. This is a draft regulation and these changes will be made effective from 1 April 2018. The third-party premium rates are revised by IRDAI every year on the basis of claims raised and fulfilled in the past.

As per the new proposal, there is a slight reduction in the third-party liability premium for certain segments of vehicles that will encourage vehicle owners to abide by the legal requirement of having at least third-party liability insurance coverage. The reduction in rates is also expected to bring down the costs of comprehensive car insurance policies, as the third-party liability coverage is an in-built part of the comprehensive plan.

Third-Party Insurance Premium For Private Cars:

The premium proposed for third-party liability coverage is based on the cubic capacity of the vehicle’s engine. The updated rates for private cars are as follows:

From the above table, it is evident that the premium rates have been reduced for small cars, i.e., those with engine capacity less than 1,000 cc. The rates for medium and large vehicles remain the same as that followed last year.

This is a calculated move from the insurance regulator that is in favour of owners of small cars. Industry experts are of the opinion that the reduction in third-party premium rates will motivate prospective customers to go for small cars. The move will also increase the awareness surrounding car insurance and help buyers of small cars as they will be required to pay a lower amount on premium.

It has been observed that the third-party premium rates have always been on the rise. The implementation of the Goods and Services Tax (GST) regime has increased the rate of taxation on motor insurance products. There was an increase in tax from 15% to 18% after GST implementation. The 3% hike in tax contributed to a higher premium that the consumers were required to bear. This constant hike in cost of car insurance has been a burden for car owners, particularly those residing in Tier II and Tier III cities and rural areas.

Third-Party Insurance Premium For Two-Wheelers:

The premium proposed for third-party liability coverage is based on the cubic capacity of the engine of the two-wheeler. The updated rates are as follows:

From the above table it is evident that the third-party premium for bikes with engine capacity less than 75 cc has seen a decline. These two-wheeler owners can effectively save Rs.142 in the coming year. The owners of two-wheelers with engine capacity between 75 cc and 150 cc can also breathe a sigh of relief as the third-party premiums for such vehicles will remain the same as the previous year. However, owners of bikes that have engine capacity higher than 150 cc will have to bear higher third-party premiums going forward.

Third-Party Insurance Premium For Commercial Vehicles/Taxis:

The premium proposed for third-party liability coverage is based on the cubic capacity of the engine of the taxi. The updated rates are as follows:

From the table above, it is clear that there is a decrease in the third-party premium rates for taxis across all engine capacities.

In conclusion, it is seen that there is a reduction in third-party premium for small cars, bikes, and taxis. This is a very encouraging revision for a significant part of the motor insurance customer segment. The lower rates on insurance for specific segments are probably due to the lower claim risk for such vehicles.

The role of IRDAI in bringing about a steady increase in the third-party premium over the past few years is commendable. It has now reached a point where there is no significant fluctuation in premium rates and it is more sustainable for the insurance companies.

*The above mentioned rates are awaiting review, and the final rates will be rolled out by the beginning of April 2018.