Third-party liability cover for vehicles to cost more
From June 16, the cost of annual premiums on vehicles will go up, while the cost of longterm or multi-year premiums will remain unchanged.Updated: Jun 10, 2019 10:41 IST
The premium for third-party liability insurance for vehicles will cost around 12% more this financial year (FY). On Wednesday, the Insurance Regulatory Development Authority of India (Irdai) issued a circular stating that effective June 16, the cost of annual premiums on vehicles will go up, while the cost of longterm or multi-year premiums remain unchanged. Vehicles bought before September 2018 follow annual premium. From September 1, 2018, multi-year third-party liability insurance is mandatory for new vehicles. A third-party liability cover compensates for 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 in the buses category,” said Sajja Praveen Chowdary, head- motor insurance, Policybazaar.com. In this circular, Irdai created a distinction between school buses and buses other than school 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
Irdai had increased the cost of thirdparty liability insurance cover for vehicles which 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 from June 16, the premium for private cars not exceeding 1,000 cc, is ₹2,072, while the proposed premium for the same category was ₹2,120. For cars exceeding 1,000cc but not more than 1,500cc, the new premium is ₹3,221, lower than the proposed ₹3,300. The premiums for vehicles exceeding 1,500cc will remain at ₹7,890.
For two wheelers, the premium for annual renewal is unchanged. The hike in the premium is only for vehicles bought before September 1, 2018. After Supreme Court’s ruling last year, making third-party insurance mandatory for all the vehicles, the Irdai 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, while new four-wheelers owners have to buy their third-party insurance cover for a three-year period. The long-term premium rates remain unchanged.
The regulator also proposed a 15% discount on the premiums for electric vehicles. “The discount in the premiums is a small portion of the electric vehicles ecosystem but it has an impact, as the usage of electric vehicles is set to rise in the future,” said Chowdhary.