The government is planning to increase the motor third party insurance premium soon. This idea has been suggested by the insurance regulator IRDAI.
According to a CNBC-TV18 report, this proposal caused the shares of companies like ICICI Lombard General Insurance, Go Digit General Insurance, and New India Assurance Company to rise sharply.
IRDAI has recommended an average premium hike of 18 percent, with some vehicle categories possibly seeing increases of 20 to 25 percent.
The final decision on this will be made by the Ministry of Road Transport and Highways (MoRTH). This decision is expected within the next 2 to 3 weeks.
After the ministry approves, a draft notification will be published for public consultation. Then, suggestions will be collected and reviewed before the changes are implemented.
Moneycontrol reported this news but did not independently verify it. Still, the news impacted the insurance company shares.
ICICI Lombard shares rose 7 percent, reaching their highest in three months.
Go Digit Insurance shares went up about 5 percent, their highest in six months. New India Assurance shares increased about 2 percent.
What is third party insurance?
Motor third party insurance covers damages caused to a third person in a road accident.
If your vehicle injures someone or damages their property, this insurance pays for those costs. It is mandatory under the Motor Vehicle Act, 1988.
The main goal is to ensure that if your vehicle harms someone else, their expenses are paid by the insurance company.
There has been no change in this insurance premium for the past three to four years, even though the sector faced many uncertainties.
Experts believe that raising the premium by about 20 percent can help insurance companies perform better and support the sector.
Third party insurance premium hike for private vehicles
Private vehicles mainly include cars and two-wheelers. IRDAI sets the premium based on engine capacity (cc).
Below is an estimate of the increase for the financial year 2024-25 based on current rates and the proposed 18-25% hike:
| Category | Current Premium (₹) | Estimated Increase (18%) | Estimated Increase (25%) | New Premium (18%) | New Premium (25%) |
|---|---|---|---|---|---|
| Private Cars (up to 1000 cc) | 2,094 | 377 | 524 | 2,471 | 2,618 |
| Private Cars (1000–1500 cc) | 3,416 | 615 | 854 | 4,031 | 4,270 |
| Private Cars (above 1500 cc) | 7,897 | 1,421 | 1,974 | 9,318 | 9,871 |
| Two wheelers (up to 75 cc) | 538 | 97 | 135 | 635 | 673 |
| Two wheelers (75–150 cc) | 720 | 130 | 180 | 850 | 900 |
| Two wheelers (150–350 cc) | 1,366 | 246 | 342 | 1,612 | 1,708 |
| Two wheelers (above 350 cc) | 2,804 | 505 | 701 | 3,309 | 3,505 |
To explain simply
For private cars up to 1000 cc, the current premium is ₹2,094. With an 18% increase, it will become ₹2,471; with 25%, it will rise to ₹2,618.
For cars between 1000 and 1500 cc, the premium is ₹3,416 now. An 18% hike raises it to ₹4,031, and 25% hike will make it ₹4,270.
For cars above 1500 cc, the current premium is ₹7,897. It will increase to ₹9,318 at 18%, and ₹9,871 at 25%.
For two-wheelers up to 75 cc, the current premium is ₹538. It will go up to ₹635 at 18% and ₹673 at 25%.
For two-wheelers between 75 and 150 cc, the premium is ₹720 now. With an 18% increase, it becomes ₹850, and with 25%, it will be ₹900.
For bikes between 150 and 350 cc, the premium is ₹1,366 now. It will rise to ₹1,612 at 18%, and ₹1,708 at 25%.
For bikes above 350 cc, the current premium is ₹2,804. After an 18% hike, it becomes ₹3,309, and with 25%, it will reach ₹3,505.
