Irdai fixes motor third-party insurance premiums for FY19

Photo: Shutterstock
After having issued a set of proposed revisions to motor third-party insurance premiums early this month, the Insurance Regulatory and Development Authority (Irdai) notified general insurers of the rates applicable from April 1 onward. 

Irdai has kept the premium rate unchanged from that stated in its draft for private cars and two-wheelers. Business Standard had reported on the proposed changes to motor third-party premiums for vehicles of a certain capacity; those proposed changes have now been notified. 

Sanjay Datta, chief of underwriting and claims at ICICI Lombard, the general insurance company, says: “Every year, the regulator evaluates the market, segment by segment; they are now getting into evaluating micro segments. It has been a very healthy process and becoming better and better each year. The regulator examines the categories of vehicles with respect to third-party losses and then takes the appropriate action on whether there should be a revision or not.”

General insurers told Business Standard the reduction in premium rates would motivate customers, especially private car and motorcycle owners. They expect higher sales of the product, as the government and regulator are trying to promote the ‘social need’ for third-party insurance covers. 

The only difference between the proposed premium rates in the draft and those listed in the new order are those set for public goods carrying vehicles (PGCVs). For PGCVs less than 7,500 kg, the new premium rate is Rs 14,390. For those above 7,500 kg, but less than 12,000 kg, it is Rs 24,190. For those exceeding 40,000 kg, a premium rate of Rs 21,318. 

“Higher sales (of motor third-party insurance policies) are not determined only by rate increases. Many factors play a role - the number of new vehicles sold in a category also determines the volume of sales; also, how many vehicles actually renew their policy is an important factor,” says Datta. 

Private goods carrying vehicle owners (less than 7,500 kg) will now pay Rs 7,144 towards their motor third-party premiums, as opposed to Rs 7,938 earlier. E-cart owners will pay Rs 3,175 for motor third-party liability, against Rs 3,969 now. 

The premium rate for agricultural tractors has been increased from Rs 653 to Rs 816.

“This is a long-tail product. Its profitability cannot be determined immediately, as claims come after a while. We track profitability of the product over a number of years and cannot say that a rate increase will lead to more profit. However, what is more important is that the mechanism put in by the regulator works very well,” said Datta.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel