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Steep hike in third party motor cover, truckers protest

IRDA has allowed a hike of 30 per cent in the case of public commercial vehicles with GVW (gross vehicle weight) of 40 tonnes, 25 per cent for GVW of 20-40 tonnes and 15 per cent for GVW of 12-20 tonnes.

By: ENS Economic Bureau | Mumbai |
March 30, 2016 1:58:44 am

The Insurance Regulatory and Development Authority (IRDA) has allowed general insurance companies to hike the premium of third party insurance cover of passenger cars by up to 40 per cent for the fiscal 2016-17. IRDA also allowed 15-30 per cent hike in the third party premium of several categories of commercial vehicles, leading to protests from the truckers body.

For passenger cars with engine capacity up to 1,000 cc, the third party insurance premium has been hiked by 40 per cent from Rs 1,468 to Rs 2,055 and for cars with engine capacity between 1000-1500 cc, the hike is 40 per cent from Rs 1,598 to Rs 2,237. For cars with engine capacity above 1500 cc, premium has been hiked by 25 per cent from Rs 4,931 to Rs 6,164. IRDA has allowed a hike in premium for two-wheelers and commercial vehicles.

IRDA has allowed a hike of 30 per cent in the case of public commercial vehicles with GVW (gross vehicle weight) of 40 tonnes, 25 per cent for GVW of 20-40 tonnes and 15 per cent for GVW of 12-20 tonnes.


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While TP 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.

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.

“It is observed that the cost inflation index (CII) has increased by 5.57 per cent over the previous year — from 1024 in FY 2014-15 to 1081 in FY 2015-16. Some stakeholders expressed the view that minimum increase in the premium rates should be the increase in cost inflation index (CII) over the year,” IRDA said. However, the authority decided not to increase the proposed premium rates in such cases and keep the premium as proposed in the exposure draft.

The All India Motor Transport Congress (AIMTC) said, “TPP premium for commercial vehicles will not be increased without final meeting with the AIMTC and justifying the increase with transparent data.”

It alleged the data on which IRDA has hiked TPP is based on presumptions and assumptions only despite the fact that the transport fraternity has always been highlighting the discrepancies and arbitrariness every year. “Even in the last financial year, there has been ample evidence from the data furnished by IRDA wherein premium collected has been significantly increasing in commercial vehicle segment, number of policies had increased, the claim payout has come down significantly. To dodge the people of India, this time unilateral hike in TPP is in the band of 25 to 30 per cent,” the statement said.

Overall, the net incurred claims of non-life insurers stood at Rs 55,232 crore in 2014-15, against Rs 49,179 crore in 2013-14. The incurred claims exhibited an increase of 12.31 per cent in FY15. Among the various segments, health insurance and motor insurance had a high claims ratio at 96.93 per cent and 77.14 per cent respectively.

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