Get ready to shell out more for vehicle insurance. The annual premium is set to go up as the rates for third party liability cover are to be hiked.
For instance, for private cars not exceeding 1,000 cc, the existing premium of Rs 670 is proposed to be raised to Rs 740. For other high-capacity cars and two-wheelers, the rate is set to be increased by over 10 per cent.
The Insurance Regulatory and Development Authority (IRDA) has proposed these hikes in an exposure draft on review of motor insurance premium rates for third party liability cover.
The proposed hikes range from 50 per cent to 100 per cent in the case of goods-carrying vehicles depending on their capacities.
“Statistics compiled by the Insurance Information Bureau show that the third party insurance portfolio for commercial vehicles is consistently making loss. The Authority is of the view that the review of third party premium deserves due importance and urgency,” Mr M. Ramprasad, Member, Non-Life, IRDA, said in the draft.
Insurance companies are running the portfolio at a loss, he said, adding that according to IRDA estimates, insurance premium represented less than one per cent of the operating costs of transporters.
The motor pool, whereby the insurers were sharing the loss was also ‘bursting' with long-term liability threatening to run at 197 per cent, the IRDA observed.
Third party motor insurance is mandatory for all classes of vehicles. Though regulation of the tariffs in the non-life sector was withdrawn in 2007, third party motor insurance continues to be regulated.
The rates came into force in 2007 after the IRDA had issued a revised notification on premium rate for different classes of vehicles.
In recent meetings that the IRDA had with various stakeholders, including the Goods Vehicle Owners Association and the All India Motor Transport Association, it was suggested that the third party motor business be run at least on no-loss-no-profit mode to protect the long-term interest of the insurance and transport industry.
A final decision on the premium rates is likely after January 17 as the IRDA has given time till then for stakeholders to express their views.