Money & Banking

Premium for third-party motor insurance may rise 10% in FY20

Surabhi Mumbai | Updated on March 12, 2019 Published on March 12, 2019

IRDAI likely to notify new rates by month-end

The premium rates for third-party motor insurance may see an increase of 10 per cent in 2019-20 at least for some vehicle segments, even as insurers suggest the use of telematics to decide costs for customers.

“There has been an increase in costs for insurers, which should, ideally, be reflected in the premium costs,” said an executive with an insurance firm, adding that the industry has been keen on a 10 per cent to 15 per cent increase in third-party motor insurance cover.

“Third-party motor insurance is mandatory. While insurers are no longer making losses, it is still difficult to breakeven in the segment,” noted another official, adding that the premium has to keep pace with claim costs.

Submits report

A committee, set up by the Insurance Regulatory and Development Authority of India (IRDAI) to decide on third-part motor costs for 2019-20, is understood to have submitted its report. The insurance regulator is likely to announce the new rates by the month-end, which will be effective from April 1.

Last year, IRDAI had reduced third-party premium for small cars not exceeding 1,000cc, although it had increased rates for bikes with higher engine capacity. The committee is also expected to have suggested a revised classification of vehicles, which would impact their premiums. Meanwhile, insurers have also sought the use of telematics for calculating premium. This would mean that the premium could vary for customers depending on the driving distance and behaviour even if they drive the same segment of vehicle. 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.

Published on March 12, 2019
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