Third Party Motor Premiums Will Rise From April 1

IRDA, the insurance regulator has notified new rates for motor third-party premium. The rates will go up from 5% to 20% from 1 April 12. Third party motor insurance cover refers to the mandatory insurance for a car-owner in order to provide compensation for the accident victims. After taking into account inflation, average claim amounts and the expenses in claim service, the rates are notified by the insurance regulator.

But this doesn’t mean increasing premiums of the individual motor insurance. Insurers say that a hike in premium does not cover their own damages or losses. The worst effect of this hike will go to motor insurance taken for commercial vehicles. For three-wheelers (goods carrier), the premium has gone up to Rs.3,415 from the existing Rs.2,440. The rate hike for trucks with the capacity up to 7,500kg is Rs.9,818 from Rs.8,420. The premium rate for private 1000cc cars rose from Rs.880 to Rs.925.

It is noticed that third-party liability accounts for 35% of motor premiums. IRDA’s move for increasing premiums is due to the huge loss ratios that had been observing from the previous years. The loss ratios will be 213% for the current year, 183% for 2010-11 and 163% for 2009-10. A loss ratio in excess of 100 means that for every Rs.100 collected as motor premium, over Rs.100 were paid as claims, thereby indicating losses. It is observed that insurance industry took a hit of Rs.10,250 crore during 2010-11 on account of commercial third-party motor losses.

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