Insurance premiums on both private and commercial vehicles are expected to rise by 50 to 100 per cent from Monday.
The Insurance Development Regulating Authority (IRDA) has considerably hiked the premium on 'third party' insurance for all categories of vehicles up to a maximum of 150 per cent.
It has also completely de-tariffed the premiums that can be charged for fire, engineering and that part of motor insurance which relates to 'own damage'.
Said National Insurance Chairman and Managing Director V Ramaswamy, "The overall hike in motor insurance costs will be between 50 to 100 per cent. De-tariffing will bring premiums down, because of the intense competition between insurance companies. This will partially offset the rise in the cost of third party insurance that the IRDA has stipulated."
The biggest impact will be felt by the commercial and utility vehicles, since their accident probability is higher and this will be reflected in the premiums charged.
The premiums for fire and engineering insurance are also expected to fall by 20 to 30 per cent with their de-tariffing, he added.
ICICI Lombard CEO Sandeep Bakshi felt de-tarriffing would help in reducing the losses of non life insurance companies. "The premium rate for vehicles will increase overall, but only marginally," he added.
At the current IRDA fixed premium prices, 'third party' insurance is a loss making proposition for insurance companies. The total premium revenue from third party insurance is around Rs 1500 crore annually, but claims in this category amount to Rs 3500 crore per year, and the industry loses around Rs 2000 crore.
With the increased focus on health insurance and housing insurance, the industry is expected to witness a growth of over 30 per cent as against the last year growth of 20 per cent, Bakshi said.