Irda has made this proposal in the exposure draft on revision in premium rates for motor third-party (TP) insurance covers for 2014-15. While third-party motor insurance is mandatory for all vehicles plying on Indian roads, it is a loss-making business for the general insurers. Motor TP pricing, which is still regulated by the Irda, covers liability arising from third-party claims due to accidents.
According to insurance sources, general insurers had asked Irda to consider an increase of 50-60 per cent in TP premium in view of the higher provisioning currently at 210 per cent for the declined risk pool and much higher loss ratios at 140 per cent in the segment.
For goods-carrying vehicles (public and private carriers) exceeding 40,000 kg, the premium rise could be above 100 per cent, Irda said in its exposure draft. However, the regulator has proposed a 1-13 per cent decrease in premiums for goods-carrying vehicles weighing below 12,000 kg.
In the case of four-wheeled vehicles carrying passengers for hire (not more than six passengers), an increase of 24-144 per cent has been proposed. Similarly, three-wheelers carrying up to six passengers may witness a premium rise of 26.58 per cent.
Irda revises the TP premium rates every year for all classes of vehicles based on an actuarial formula, which takes into account the loss ratios for insurers, inflation, higher awards by judiciary, and other factors. In November, it sharply increased the provisioning (the cash general insurance companies need to set aside to meet the high level of claims) to 210 per cent of the claims from 145 per cent, based on the loss estimates by an actuarial committee.
Proposes Up to 137% hike for cars
The Regulator has proposed a rise of 25-137% for private cars and 1-45% for two-wheelers in third-party premium for FY15
Insurers had asked for a hike of 50-60% in premium in view of higher provisioning, currently at 210 per cent, for the declined risk pool and much higher loss ratios in the segment, according to sources
Last year, TP motor insurance rates had gone up by 20 per cent after transporters opposed the 60 per cent hike demanded by insurers. Two years ago, these rates were hiked by 65 per cent.