The Insurance Regulatory Authority of India (IRDAI) has decided not to increase the annual premium for Third Party (TP) policies until further orders. As per an IRDAI circular, the insurance regulator has made it clear that the insurers will continue to charge the current rate of premium for Motor Third Party Liability Insurance from April 1, 2019.
“The status quo may be because of elections. Premiums could rise after elections,” said an industry official. Insurers were expecting TP premium, currently regulated by IRDAI, to rise by 20-30 per cent going by last 6 years’ trend. Over the last 6 years, third-party premiums increased by 29 per cent for car and 23 per cent for two-wheelers on an average.
“Not increasing motor TP premium is the right decision. It is already over-priced and insurers are using it to cross-subsidise motor OD and pay enhanced incentives (cleverly concealed) to dealers and intermediaries,” said an industry source.
Every year, the regulator decides the third party insurance premium that remains the same across all the insurers. The premium is evaluated considering the annual claims data of all insurers across different cubic/engine capacity of the vehicle. Under a motor insurance policy, there are two major components: Third-party insurance and Own Damage Insurance. As per The Motor Vehicles Act, 1988, it is mandatory to insure vehicles with at least third-party insurance cover.
Last year, IRDAI had reduced third-party premium for small cars not exceeding 1,000cc. However, it had increased rates for bikes with higher engine capacity. Third-party insurance insures the first party or the vehicle owner against damages caused by the vehicle to third parties. Third parties may include pedestrians, other vehicles, or even someone’s property. TP insurance protects insured from any legal liability arising due to damages caused to third parties during road accident.
According to officials, insurers have sought the use of telematics for calculating premium. This means that the premium could vary for customers depending on the driving habits and behaviour. This is done based on the findings of the telematics or black box, which is fitted in the car to monitor the driving habits, quality and distance of roads travelled.