After a steep hike in premiums for third-party liability for 2017-18, the insurance regulator has now lowered the rates following protest by a section of truckers against the move to substantially hike insurance rates. While there will be no increase in premium for private cars with engine capacities below 1,000 cc, for those above 1000 cc it will cost 28% more now. The hike for two-wheelers would be 16-28% and for commercial vehicles carrying goods, it will up to 28%.
Within a fortnight Insurance Regulatory and Development Authority of India (Irdai) has revised the third-party premium twice. The final rates are much lower than what were proposed in the March 3 exposure draft and the first revision order on March 28. The final revised rates were issued on April 17 and will apply retrospectively from April 1, 2017.
In the draft exposure, the regulator had proposed a steep hike of 50% in the third-party premium rate for private cars above 1,000 cc and 16 to 50% for two-wheelers.
For private cars with engine capacity below 1,000 cc (Nano, Eon, Alto, Kwid), third-party premium will be `2,055; for 1000 cc-1,500 cc (Honda Jazz, Maruti Swift, Hyundai Grand i10, Volkswagen Polo) it will be `2,863. On March 28, the regulator had fixed `3,132 for this category of vehicles. For over 1500 cc, (Hyundai Verna, Hyundai Elantra, Skoda Octavia, Toyota Corolla) it will be `7,890 for a year. Irdai had fixed `8,630 for this category on March 28.
For two-wheelers with capacity below 75 cc, third-party premium will be `569. For 75-150 cc it will be `720; for 150- 350 cc it will be `887 and for above 350 cc it will be `1,019. For commercial vehicles, the rates were lowered significantly from what was proposed in the draft exposure after intense protest from transporters across the country. In fact, the regulator has revised the mandatory-cover rate every year for the past seven years. Irdai has reduced third-party premium rates for most truck categories in the second circular. For goods (exceeding 40,000 kg) carrying vehicles and public
Irdai has reduced third-party premium rates for most truck categories in the second circular. For goods (exceeding 40,000 kg) carrying vehicles and public carriers it has been reduced to `33,024 from `36,120 notified on March 28. However, the rate has been increased 28% as compared to last year. It has also reduced rates for e-rickshaw and passenger carrying vehicles in its second circular.
Considering the mandatory nature of third-party insurance, Irdai has asked insurers to ensure that third-party insurance is made available at their underwriting offices and through all available channels of distribution. Insurers cannot cancel the current insurance policies and issue fresh policies to effect the new premium rates. Motor insurance comprises own-damage and third-party insurance and any vehicle that plies on the road will mandatorily need a third-party cover under the Motor Vehicles Act. Third-party liability is decided and awarded by the judiciary taking into account the age of deceased, earning capacity, wages, etc.
While the claims liability for third-party is unlimited, the new Motors Vehicles (Amendment) Bill proposed to put a cap of `10 lakh for death and `5 lakh for grievous injuries. However, the proposed cap was dropped. Instead, the Bill has raised the minimum compensation to `2.5 lakh for grievous injury and `5 lakh for death and maximum compensation claim will be unlimited. Victims have to go to the claims tribunal for the final award and the insurer will pay the amount. In fact, insurance companies have been demanding the capping of claims as the third-party portfolio of insurers make huge losses every year.
The reported claims frequency is the highest for the goods carrying segment, followed by passenger vehicles and private cars. Litigation related to the claim amount can go on for years.