Your Money: Third-party motor insurance premium likely to get costlier


After three years, the premium for third-party motor insurance is set to rise  as the ministry of road transport and highways in consultation with Insurance Regulatory and Development Authority of India (Irdai) has issued a draft notification for the revision of rates. For private cars with engine capacity up to 1,000 cc, the proposed premium for mandatory third-party liability insurance will increase from Rs 2,072 to Rs 2,094. For those exceeding 1000 cc but less than 1500 cc, the premium will rise from Rs 3,221 to Rs 3,416. For private cars above 1,500 cc, the premium will go up from Rs 7,890 to Rs 7,897.

The premium for two-wheelers not exceeding 75 cc engine capacity is likely to increase 11.6% from Rs 482 to Rs 538. For two-wheelers exceeding 75 cc but below 150 cc, the premium will be Rs 714; for those exceeding 150cc but below 350 cc the premium will rise from Rs 1,193 to Rs 1,366 and for those exceeding 350 cc will rise from Rs 2,323 to Rs 2,804. The regulator has sought suggestions from all stakeholders by March 14.

For the vintage cars segment, there is no substantial data relating to the past experience. The regulator is offering a discounted price of 50% of the proposed rate based on the erstwhile Indian Motor Tariff (IMT). Further, it has proposed a discount of 15% for electric private cars, electric two-wheelers, electric goods carrying commercial vehicles and electric passenger carrying vehicles. A discount of 7.5% is proposed for hybrid electric vehicles. The premium for electric private cars for 30 KW will be Rs 1,780; for 30- 65 KW it will be Rs 2,904 and those above 65 MW it will be Rs 6,712.

Long-term rates

The long-term cover for private cars below 1000 cc will be Rs 6,521 for three-year single premium; between 1000 cc and 1500 cc the three-year single premium will be Rs 10,640 and for those above 1500 cc the three-year single premium will be Rs 24,596.

For two-wheelers below 75 cc, the three-year single premium will be Rs 2,901; between 75 cc to 150 cc the premium will be Rs 3,851; between 150 cc to 350 cc the premium will be Rs 7,365 and for those over 350 cc it will be Rs 15,117. The long-term rates for private electric vehicles would be Rs 5,543 for cars below 30 KW; for 30-65 KW the premium would be Rs 9,044; and for those above 65 KW would be Rs 20,907.

Premium calculation

Irdai has analysed the claims paid data in respect of each of the accident years starting from 2011-12 up to 2020-21. The ultimate claims cost of each segment for each accident year has been estimated using the actuarial technique of Basic Chain Ladder Method. Since 2011, the rates for third-party insurance have been fixed every year and notified in the last week of March. However, since June 2019, the rates have not been revised. Third-party motor insurance is mandatory under the Motor Vehicles Act.

T A Ramalingam, chief technical officer, Bajaj Allianz General Insurance, says it has been three years since the motor third-party premium rates were changed, while the award size has been increasing owing to various judgements. “The draft notification proposes substantial increase in long-term two-wheeler third-party rates, whereas there is a nominal increase in private car and commercial vehicle rates. Additionally, 15% discount is proposed in electric bikes and cars and there’s a 7.5% discount in hybrid vehicles, which is in line with the impetus the government intends to give to electric vehicles. However, this is just a draft and we need to wait for the final circular to analyse the impact of the same,” he says.