What Do You Need to Know About IRDA’s Hike in Third Party Car Insurance?
Third party car insurance is the bare minimum mandatory coverage for the car owner under the Motors Vehicle Act, 1961. The idea of third party stems from the fact that the main beneficiary is neither the insurer nor the insurance company, rather a pretentious third party. Under the third party insurance, the insured is covered for bodily injury as well as damage to third party vehicle. As per the regulations, the apex body of insurance company Insurance Regulatory and Development Authority of India (IRDAI) sets the third party car insurance premium that can be charged by any insurance provider in India.
Is there any hike in insurance premium?
Well, the answer is yes. The IRDAI has planned to raise its premium amount by 50% in the sectors covering cars, two-wheelers and commercial vehicles starting from April 1, 2017. The long pending proposal has been cleared and put into effect by April 1, 2017. Since the proposal is for big cars, the third party premium for small cars is not affected.
Why has such a decision been taken?
This decision has been taken after a long and extensive thought process. The rate of third party insurance premium is reviewed every year and then implemented according to inflation and incurred claim ratio. Earlier, IRDAI used to raise the premium after every 5 years, but due to the losses incurred by the third party car insurance companies, the IRDAI plans to review third party premium rates of two-wheelers and car insurance company after a year.
IRDAI proposal for smaller cars
As mentioned earlier, IRDAI has its own definition of small cars. By small cars, they mean the cars having a cubic capacity of 1000 cc or less. The present third party insurance for such cars is Rs. 2055 and it will remain the same. While for a mid-segment car having a capacity of 1000-1500 cc, the proposed increase is 50% and this includes SUV too. The current third party insurance premium works out to Rs. 2863. For vehicles exceeding 1500cc, the TP premium is fixed at Rs. 7890.
For public carriers (7500 kgs), the TP premium amount is Rs. 14,390. For vehicles carrying between 7500-12000 kgs., the amount will be Rs. 19,667, and for 12000-20000 kgs., the amount is fixed at Rs. 28,899. If a public carrier is carrying 20000-40000 kgs., the TP premium will be Rs. 31,626 and Rs. 33,024 for public vehicles carrying more than 40000 kgs.
How will the insurance company react to it?
The IRDAI decision to review the third party insurance claim after every year has come as a big relief to the beleaguered third party insurance industry. This step is definitely what these companies were expecting from the regulatory authority.