General Motors Co. Chevrolet cars are displayed in a showroom in Pune, India. (Photographer: Adeel Halim/Bloomberg)

Third-Party Insurance For Cars, Two-Wheelers To Become Costlier From June 16

Car and two-wheeler insurance will cost more from June 16 with regulator Insurance Regulatory and Development Authority of India increasing the mandatory third party motor insurance premium by up to 21 percent for certain categories.

Normally, the mandatory motor TP insurance cover rates are revised from April 1. However, this time, the new rates for the fiscal 2019-20 will be applicable from June 16.

The Irdai in an order said the new TP insurance for smaller cars (less than 1,000 cc) will cost Rs 2,072 or 12 percent from the existing Rs 1,850. The hike in insurance premium for cars with engine capacity of 1,000 cc to 1,500 cc has been increased by 12.5 percent to Rs 3,221.

However, the TP premium for cars with higher engine capacity (1,500 cc plus) has been retained at Rs 7,890.

The Federation of Automobile Dealers Associations said the hike in third-party motor insurance premiums for the financial year 2020 will further hit vehicle sales, which have already been witnessing a prolonged slump. "The automobile industry is already going through a difficult phase with low sales and subdued customer sentiments,” FADA Hony Secretary Manish Raj Singhania said in a statement. “This sudden change in price hike of third party insurance will again dent the pace of sales, specially the 2W category which is already reeling under price hike for mandatory five years insurance and ABS/CBD implementation.”

The new Motor Third Party Liability Insurance Cover from June 16 will be Rs 482, up 12.88 per cent for two-wheelers with engine capacity of less than 75 cc and Rs 752 for those with engine capacity of 75-150 cc.

Asking Irdai to reconsider the hike, Singhania said this increase would significantly impact sales volume, also affecting insurance business.

The maximum hike is for two-wheelers having engine capacity between 150-350 cc. The new premium will be Rs 1,193, up 21.11 pe cent from the existing Rs 985. There will be no change in TP insurance premium for super bikes (350 cc plus).

Irdai has also increased the TP insurance for public as well as private goods carrying vehicles.

There is no change for rates in case of e-rickshaw. However, the third party insurance premium in case of school buses has been increased.

Also, there is no change in long-term single premium rates. In case of cars, the long-term premium is for three years, and for two-wheelers, it is five years.

"Going forward, we would require substantial support from all quarters and specially the insurance industry to help the automobile industry to recover from the slowing demand effected by the uncertainty around NBFC and the previous regulation passed for collecting three and five years of premium for new cars and two-wheelers, respectively," Singhania said.

FADA, however, said it welcomed the proposed 15 per cent discount on third party insurance on electric vehicles (private cars and two wheelers) although the sales of such vehicles are very minuscule.

Also read: IRDAI May Bar Insurers From Excluding Critical Illnesses From Health Insurance Coverage 

Bloomberg Quint

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