Auto sales in India, which are currently going through a major slump, is going to take a further hit curtsey the recent announcement of the hike in third party insurance premiums according to Federation of Automobile Dealers Associations (FADA). The hike, which was announced by the Insurance Regulatory and Development Authority of India’s (IRDAI) will come in effect starting June 16 for the current financial year. FADA Hony Secretary Manish Raj Singhania said in a statement that the automobile industry due to the low sales and subdued customer sentiments, the Indian automobile industry is currently going through a difficult phase.
He further added that the sudden increase in the prices of third-party insurance premiums which once again going to affect the sales pace adversely. The effect will be more prominent on the 2W segments which are facing a burden of the increase in costs due to mandatory 5 years insurance along with the implementation of new safety regulations. Singhania has asked IRDAI to reconsider the hike on third-party insurance premiums as it is going to put an adverse effect of sales volumes and not only this, but it is also going to have an impact on insurance business.
According to the new order, the third party insurance premium for private cars which has engines under 1,000 cc capacity is going to be Rs 2,072. Under the current regulations, the amount that one has to pay stands at Rs 1,850. Private cars which have engines in-between 1,000 cc and 1,500 cc, the insurance premium costs are now going to be Rs 3,221 in comparison to the current Rs 2,863. Cars having engine capacity exceeding 1,500 cc, the prices remain the same at Rs 7,890.
Moving on to the two-wheelers, those having an engine capacity of less than 75 cc has been increased to Rs 482 from Rs 427. Two-wheelers with engines exceeding 75 cc but less than 150 cc will attract a premium of Rs 752 as against Rs 720 earlier. For those exceeding 150 cc but below 350 cc the premium will go up to Rs 1,193 from Rs 985.
The insurance regulator has, however, kept the premium on two-wheeler exceeding 350 cc engine capacity same at Rs 2,323.
Singhania says that moving forward, there is a need for substantial support from all quarters and especially the insurance industry to help the automobile industry to recover from the slowing demand affected by the uncertainty around NBFC and the previous regulation passed for collecting three and five years of premium for new cars and two-wheelers, respectively. However, FADA has welcomed the proposed 15 per cent discount on the third party insurance on electric vehicles (private cars and two-wheelers) although the sales of such vehicles are very minuscule.
Inputs: PTI
