Premium for third-party liability cover for motor insurance goes up
On Wednesday, the Insurance Regulatory Development Authority of India announced that effective June 16 the cost of annual premium on the vehicles will go up whereas the cost of long-term or multi-year premium remains unchanged.Updated: Jun 05, 2019 13:31 IST
The premium for third-party liability insurance for vehicles to cost around 12% more this financial year.
On Wednesday, the Insurance Regulatory Development Authority of India (Irdai) in a circular announced that effective June 16 the cost of annual premium on the vehicles will go up whereas the cost of long-term or multi-year premium remains unchanged. Vehicles bought before September 2018 follow annual premium. From 1 September 2018 multi-year third-party insurance is mandatory for new vehicles.
A third party liability cover compensates for any damages made to a third party by the insured person. “The main changes in the latest circular is the timeline of June 16 that has been provided to the insurers, the introduction of electric vehicles with proper categorisation, overall impact of a hike of 12.5% in the premiums and categorisation introduced the buses category,” said Sajja Praveen Chowdary, head- motor insurance, Policybazaar.com.
Until last year, there was no categorisation in buses but with this circular, the regulator has created a distinction between school buses and other buses. For school buses the premium has increased by 5% and for other buses the premium has been raised by 10%,” he added.
The change in cost
The regulator had increased the cost of third party liability insurance cover for vehicles which still follow the annual renewal system. However, the final cost of premium is lower than the proposed rate in a draft on revision in premium rates by Irdai in May.
Effective June 16, for private cars not exceeding 1,000 cc, the premium is set at Rs 2,072 whereas the proposed premium for the same category was Rs 2,120. For cars exceeding 1,000 cc but not exceeding 1,500 cc, the new premium is Rs 3,221, lower than the proposed premium of Rs 3,300. The regulator had stated in its older circular as well that premiums for vehicles exceeding 1,500 cc will remain at Rs 7,890 and it has stayed with its decision.
For two wheelers, the insurance premium for annual renewal is unchanged. This hike in premium is only for vehicles bought before September 1, 2018.
After Supreme Court’s ruling last year making third party insurance mandatory for all vehicles plying on Indian roads, Irdai had made it mandatory for all vehicles bought after September 1 to purchase long-term premiums.
New two wheeler owners have to buy third party liability insurance premium for a five-year period and pay the consolidated amount upfront whereas new four-wheelers owners have to buy their third party insurance cover for a three-year period and also pay the amount upfront. The long-term premium rates have stayed the same since they were first introduced in August 2018.
In the circular released last month, the regulator had also proposed a 15% discount on the premiums for electric vehicles. For electric private cars not exceeding 30 kilowatt, the premium has been fixed at Rs 1,761, exceeding 30 kilowatt and not exceeding 65 kw the premium is set at Rs 2, 738 and for those exceeding 65 kilowatt the premium has been locked at Rs 6,707.
For electric two wheelers not exceeding 3 kilowatt, the one-year premium is Rs 410, exceeding 3 kw and not exceeding 7 kilowatt, the premium is Rs 639, for electric two-wheelers exceeding 7 kilowatt and not exceeding 16 kilowatt the premium is Rs 1,014 and for those exceeding 16 kilowatt the premium is Rs 1,975.
In case of multi-year premium, for electric private cars not exceeding 30 kilowatt, the premium is fixed at Rs 4,493, exceeding 30 kw and not exceeding 65 kw the premium is Rs 8,104 and for those exceeding 65 kilowatt the premium is Rs 20,659.
“There are far less number of electric vehicles plying on the road. The discount in these insurance premiums is a very small portion of the entire elective vehicles ecosystem but it definitely does have an impact and in the longer term, the usage of electric vehicles is set to rise,” said Chowdhary.