By Preeti Kulkarni
The insurance regulator has invited responses to a proposal to increase the third-party motor insurance premium by 14% to 108%. However, industry observers believe that the hike will not be so steep. "Like last year, the hike will be moderated. It may not go beyond 20%," said a senior executive of a private general insurance company. In February 2014, the Insurance Regulatory and Development Authority of India (IRDAI) had proposed an increase of 25-136% and 0.96-45% for private cars and twowheelers, respectively. However, the final hike was only around 20%.
Third-party motor insurance is mandatory and protects the owner of the vehicle against any compensation sought by the victim of a road accident caused by the vehicle.There is no cap on the compensation that a victim can claim in case of an accident. But there is a cap on the third-party premium. Insurers want this cap removed so that they can charge according to the risk they undertake.
"The regulator and insurers understand that they need to make a pitch for higher rates to get what they actually aim for. That is the reason why the proposed hike looks steep. It will be significantly watered down when the final rates are announced, " said a Mumbai-based insurance broker.
Moreover, third-party component accounts for just 1-2% of your comprehensive motor insurance premiums, which means that the hike will not significantly push up your total premiums. In absolute terms, it will go up by a few hundred rupees. The increase is hardly worth losing your sleep over for an expense you incur only once a year.
Third-party motor insurance is mandatory and protects the owner of the vehicle against any compensation sought by the victim of a road accident caused by the vehicle.There is no cap on the compensation that a victim can claim in case of an accident. But there is a cap on the third-party premium. Insurers want this cap removed so that they can charge according to the risk they undertake.
"The regulator and insurers understand that they need to make a pitch for higher rates to get what they actually aim for. That is the reason why the proposed hike looks steep. It will be significantly watered down when the final rates are announced, " said a Mumbai-based insurance broker.
Moreover, third-party component accounts for just 1-2% of your comprehensive motor insurance premiums, which means that the hike will not significantly push up your total premiums. In absolute terms, it will go up by a few hundred rupees. The increase is hardly worth losing your sleep over for an expense you incur only once a year.
Source:-The Economic Times
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