Cars, two-wheelers and transport vehicles owners should get ready to pay more insurance premium from the financial year 2019-20 onwards. Reason: the Insurance Regulatory and Development Authority of India (IRDAI) declared that it will increase Motor Third Party (TP) premium rates for cars less than 1,000 CC to Rs 2,120 from the current Rs 1,850 for FY20.
Also, premium for cars between 1,000 cc and 1,500 cc have been proposed to be increased from Rs 2,863 to Rs 3,300, IRDAI release said. There is good news for luxury car owners as no change has been announced for them with regards to TP premiums. Luxury cars with engine capacity of 1,500 CC will continue to pay Rs 7,890 premium in the FY20 as well.
Tushar Dhimar, National Underwriting Manager – Retail, SBI General Insurance, said, “As far as new customers opting to buy new vehicles are concerned, there is no change suggested in private car and two-wheeler long-term product premiums. Hence, there will be no impact. However, for old vehicles, the increase may cost end customer marginally as the premium on own damage side have been reducing during last few months.
So, will the proposed hike affect the business of the non-life insurance companies? Dhimar replied, “Since Motor TP is a long-tail business and has been historically loss making in many countries including India, price increase which is proposed now by the regulator may cover inflation cost as far as insurers are covered. The long tail effect may not be known at this juncture.”
As per the rules, IRDAI revises premium rates on April 1, every year but this time the insurance regulator has gone with the old rates till further orders. IRDAI has issued a draft for new rates for TP premiums for current financial year. According to the draft, premium for two-wheelers below 75 cc has been proposed at Rs 482, up from Rs 427. The insurance regulator has also proposed ah hike for two-wheelers between 75 cc and 350 cc. However, it has not proposed any hike for superbikes or more than 350 cc engines.
The insurance regulator has given discounts on electric vehicles, which has been hailed as a good step. Besides, the move was taken with sole motive of promoting the sale of environment-friendly vehicles among consumers. For the purpose, the regulator has drafted a 15% discount on Motor TP on electric private cars and electric private two-wheelers. “This is indeed a very good move by the regulator to promote electric vehicles in one way. More is required on this front on subsidy in terms of vehicle cost which will make use of greener vehicles more helping country to reduce pollution,” Dhimar added.
It must be noted, according to Dhimar, that the percentage of the total premium income coming from motor TP varies for each segment like private cars, two wheelers and commercial vehicles. Generally in private cars, own damage section is on higher side whereas in two wheelers and commercial vehicles third party section is on higher side. “For new vehicles third party contribution is bit on lower side whereas in older vehicles for e.g. vehicles above 4th year onwards third party section premium contribution may be as high as 50%,” he added.