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Motor insurance premiums that you pay for your car, two-wheeler, bus and trucks are likely to be hiked in the next few days.
If the draft guidelines are accepted, premiums on trucks and buses would go up by 80 per cent. For cars and two-wheelers the increase would be by 10 per cent.
The hike has been on the cards for some time because of rising claims arising out of road accidents. An announcement from the Insurance Regulatory and Development Authority (IRDA) on this is expected shortly.
This increase in premium would be after a gap of four years. The motor segment — especially the truckers' group — has generally resisted any increase in rates and managed to bring down the quantum of hikes in the past.
Annual hikes
According to sources close to the development, the regulator plans to introduce a new concept of annual increments along with the hike in rates this time. The premium rate for this segment is fixed by the IRDA. The insurance watchdog had placed an exposure draft of revision of premium rates on its Web site three months ago asking for comments.
The move to hike these rates comes as a result of claim payouts due to accidents being more than the premiums collected by the insurance companies. Even the motor pool, a corpus created five years ago to handle the losses from this segment, is currently running at a deficit. On account of this, the regulator has asked insurers to make provisions of Rs 3,750 crore for the last four years.
In 2009-10, for every Rs 100 of premium earned by insuring trucks and buses (on third party) insurers were paying out Rs 122 as claims. Insuring large vehicles is a major cause of concern for insurers as the claim payout due to fatality or disablement of third party involved in the event of accident is significant. Insurers prefer insuring cars or two-wheelers, as, for every Rs 100 collected as premium the claim payout is about Rs 55.
In January 2007, the IRDA had raised its premium rates of this insurance by 150 per cent but with transporters going on country-wide strike, the regulator had to scale down the hike to 70 per cent.
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