Motor Insurance: If you also drive a vehicle, then this news is extremely important for you! Your Motor Third Party (TP) insurance premium may soon become more expensive. The Insurance Regulatory and Development Authority of India (IRDAI) has proposed an increase in the premium.
If this proposal is accepted, then insuring cars and other vehicles will now become more expensive. IRDAI has recommended an average increase of 18% in the third-party premium to the Ministry of Road Transport and Highways (MoRTH). In some categories, this increase can also be from 20% to 25%, which will directly affect your pocket.
Why is there this premium increase
Third Party Insurance comes in handy in a situation when your vehicle causes damage to a third party, be it bodily injury or property damage. This insurance is mandatory in India, but there has been no increase in it for the last four years, while insurance companies are continuously incurring huge losses in this segment.
According to sources, in FY 2025, motor third-party insurance was about 60% of the total motor insurance premium and 19% of the total premium of the entire general insurance industry. This shows how important this segment is for the insurance industry and how much the losses in it affect the financial position of the industry.
How much are insurance companies losing
A government company like New India Assurance had a TP loss ratio of 108% in FY25, which means that claims had to be paid more than premiums. Private companies like Go Digit and ICICI Lombard had a loss ratio of 69% and 64.2% respectively.
Therefore, insurance companies are constantly demanding that the TP premium be updated periodically to cover medical expenses, compensation given by courts, and increasing vehicle load on roads. Due to rising inflation and the number of road accidents, the amount of claims has also increased tremendously.
What will happen next
The government can take a decision on this in the next 2-3 weeks. After the decision, a draft notification will be issued, in which opinions will be taken from the general public and all concerned parties. Only after this, the final decision will be taken. Experts believe that if the TP premium increases by 20%, the underwriting profitability (Combined Ratio) of the insurance industry can improve by 4-5%.
Third-party insurance rates have been frozen for four years, while costs and claims have increased continuously. In such a situation, the government will likely decide to increase the premium in the coming weeks. If this happens, car owners will have to pay a little more for their car insurance. This is a mandatory expense that cannot be avoided, so it is important to be mentally prepared for it.