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Solution To Repeated Hikes In Third Party Insurance Premiums

Update (Apr 18th): IRDAI amends its earlier order and revises the third-party premium rates for 2017-18 announced earlier.

Insurance Regulatory and Development Authority of India (IRDAI) has announced YET ANOTHER steep hike in the premium rates for the third-party vehicle insurance cover.

This has become an annual ritual. 

This year, the small cars and small two-wheelers have been spared. There is no change in the third-party cover premiums for such vehicles. However, bigger capacity cars and bikes will have to pay extra 40% 28% premium in 2017-18.

In this post, we discuss the new premium rates... and how we can probably mitigate the burden of these repeated hikes.

Before we look at the revised premium rates for third-party insurance cover in 2017-18, here's a recap of what is third-party cover on our cars, two-wheelers and other vehicles.

Any (a) injury or death of a third person and / or (b) damage to his / her property, caused by your vehicle is insured through what is known as a third-party cover. It also includes personal accident cover — both death and disability — for the owner / driver.

This type of cover is mandatory. You are not supposed to drive your vehicle, if it is uninsured against third-party damage.

It is unlawful to drive without an insurance cover against damage to third party.

But what about damage to your own vehicle?

Well, you have to take additional insurance cover for that. This is known as Own-damage Cover which, by the way, is completely optional. If you think you can manage to pay for any damage to your vehicle out of your own pocket, you are most welcome to skip buying own-damage insurance.

An interesting aspect of vehicle insurance is that the third-party premium rates are still regulated and decided by the IRDAI. Whereas, the own-damage premium rates have been de-regulated for insurance companies to decide as per their business fundamentals.

The third-party premiums rates for cars and two-wheelers for previous four years and for the current FY 2017-18, as announced by IRDAI, are given in the table below.



As you will observe, year after year IRDAI has effected substantial hikes in the third-party premium rates.

This year there is 40% 28% jump in the premium for private cars of in the 1000+ cc categories

Likewise, two-wheelers with more than 150 cc capacity too will suffer a 40% 28% increase in their premium. 

Two-wheelers in 75 to 150 cc category suffer a comparatively reasonable 16% hike. As mentioned earlier, there is no change in the premium rates for small cars (less than 1000 cc) and small two-wheelers (less than 150 cc). 

Most commercial vehicles too (such as Goods Carrying Public and Private Carriers, Three Wheeler Goods Carrying Public and Private Vehicles, Trailers, Motor Trade-Road Transit Risks and various categories of vehicles used in transport of passengers) have been spared this year, with only minor revisions in most cases.

Meanwhile, in another annual ritual, the truckers associations have threatened to announce a countrywide strike. They are of the opinion that IRDAI does not fix the third-party premium rates in a transparent manner. The accident rates for cars and two-wheelers being higher, such vehicles should bear the proportionate cost. Whereas, presently commercial vehicles have to share a disproportionately higher burden. 

[The counter-argument to this could be that the damage caused by a two-wheeler or a car would be comparatively much less than the damage caused by buses and trucks.]


Is there a solution to this repeated increase in third-party premium rates?

Well, the answer is No and Yes.

No. You cannot save on the third-party premium. We have to live with IRDAI's diktat.

Yes. You can bring down the own-damage premium.

This will definitely slash your total premium bill for the year, towards a comprehensive insurance cover for your vehicle.

Points to Note
1. The revised premium rates will apply only to the new policies issued and the old policies renewed during the year. Insurers cannot cancel the existing policies already in-force and issue new policies at the revised rates.

2. Since third-party insurance is mandatory, insurance companies have been advised by IRDAI to make such policies readily available at all their underwriting offices and also through all available channels of distribution.

3. Complaints about non-availability, delay or denial of third-party insurance cover would be taken seriously by the IRDAI.

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