Third Party Vehicle Insurance: Motor third party (TP) insurance premiums may soon increase.
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a hike. If approved, vehicle insurance will become more expensive.
IRDAI has suggested an average increase of 18% in TP insurance premiums to the Ministry of Road Transport and Highways (MoRTH). In some categories, the increase could be between 20% and 25%.
Why Is This Hike Being Proposed?
Third party insurance helps when someone else is injured or their property is damaged due to your vehicle. It is mandatory in India.
However, there has been no increase in TP premiums in the last four years, while insurance companies have been facing heavy losses in this segment.
Sources say that in FY25, motor third party insurance made up around 60% of the total motor insurance premium and 19% of the overall general insurance premium in the industry.
How Much Loss Are Insurers Facing?
The loss ratio (claims paid vs premium earned) for insurers is quite high. For example, the TP loss ratio of New India Assurance, a government insurer, was 108% in FY25—meaning it paid more in claims than it earned in premiums.
Private insurers like Go Digit and ICICI Lombard had TP loss ratios of 69% and 64.2%, respectively.
This is why insurers are urging the government to raise the TP premium regularly, to keep up with rising medical costs, court compensations, and the growing number of vehicles on the roads.
What’s Likely to Happen Next?
The government may take a final decision in the next 2–3 weeks. After this, a draft notification will be issued, inviting feedback from the public and other stakeholders.
Only after this consultation will the final rates be announced.
Experts say that if the TP premium goes up by 20%, it could improve the insurance industry’s underwriting profitability (combined ratio) by 4–5%.
No Hike in Four Years, But Costs Have Risen
Third party premiums have been unchanged for the last four years, even though claims and costs have gone up significantly.
Therefore, a decision to raise premiums is expected soon. If approved, car owners will need to pay more for insurance.
