After the government's notification on increased compensation for third-party, premium rates of motor insurance
may rise. “There may not be any immediate impact on third-party premium rates. IRDAI typically increases third-party rates every year. This year was an exception when third-party rates went down,” says Tarun Mathur, chief business officer, Policybazaar.com.
Third-party premium rates may rise after April 2019, depending on the number of claims received and third-party losses seen by insurance
companies. “Premiums for third-party covers may rise around 10-20 per cent over and above the annual revision of third-party premium,” adds Singh. Since third-party is a mandatory cover, policyholders will have to comply with the premium hike.
Prior to this notification, according to insurance companies, for accidents resulting in death, though the payout ranged from Rs 50,000 up to any amount decided by the court, the average claim size for general insurance companies for a death claim was around Rs 300,000 to Rs 400,000. “The general insurance players will witness certain impact on pending claims on their books and the overall industry will be affected to the tune of Rs 100-250 billion,” says Singh.
At present, people don't make claims for third-party injuries or deaths because of the hassle of going to the courts, and the long time it takes to get compensation awarded by them. But now, with an amount having been fixed, the industry may see third-party claims wise as awareness about the new compensation norms increases, and the compensation amount is also increased by 5 per cent each year.