NEW DELHI: In what may come as a relief to vehicle owners who already are struggling with higher upfront insurance premium cost, the Insaurance Regulatory and Development Authority of India (IRDAI) has decided not to raise the third-party insurance premiums for bikes, cars and commercial vehicles this year.
Every year, IRDAI fixes third-party insurance rates in the range of 10-40 per cent. There were expectations that the rates would be increased this year as well.
“IRDAI extends the validity of premium rates beyond March 31, 2019, until further notice. In other words, insurers shall continue to charge the rates currently being charged for Motor Third Party Liability lnsurance Cover from April 1, 2019 onwards until further orders,” said an IRDAI notification.
Motor insurance consists of two types: own damage and third-party cover. Third-party insurance is mandatory, with premium being fixed by the regulator on an annual basis. Insurers, on the other hand, fix their own rates for own damage and personal accident.
The financial year 2019 saw two premium hikes in April and September respectively. The second hike was mainly on account of a Supreme Court order that had made it mandatory to buy three-year car insurance and five-year bike insurance for third-party liabilities.
Subsequently, third-party premiums went up by three-five times for new cars and bikes, which not only pinched customers’ pockets, but also led to an impact on vehicle sales from October 2018 onwards.
Experts said that poor renewal rate was the reason behind the recent Supreme Court directive mandating third party insurance for three years for cars and five years for bikes. Turtlemint, a technology platform in the insurance distribution space, said in a recent study that while more than 98 per cent of the people renewing their policies do it before the expiry date if the car is a year old, the numbers show a sharp decline as the car ages.
If the car is five years old or more, just 68 per cent renew insurance before the expiry date, and for 10+ years, only 57 per cent do it before the expiry date. All such vehicles that are renewed after the expiry date remain uninsured for a temporary period and hence, contribute to 25 per cent of uninsured vehicles plying on the roads.
The cost of premium for the third party insurance is categorised on the basis of vehicle type and engine capacity.
As per IRDAI, the present rates for small mopeds, small capacity scooters and two-wheelers with engine capacity below 75 CC shall remain at Rs 427. The rates for scooters and motorbikes with engine capacity between 75-150 CC will be Rs 720 and for high-powered bikes is Rs 985.
For small car owners, premium shall remain at Rs 1,850; premium for SUVs above 1,500 CC will be at Rs 7,890 and for Sedans between 1,000-1,500 CC, the rates would remain at Rs 2,863. Rates for auto-rickshaws and e-rickshaws are Rs 2,595 and Rs 1,685 respectively. Rates for taxis and smaller commercial cars shall remain the same at Rs 5,437 per annum; entry-level sedans might have to pay Rs 7,417 a year.