Final review in MoRTH on IRDAI proposed 18–25% motor third‑party insurance premium hike
The Insurance Regulatory and Development Authority of India (IRDAI) has recommended an average 18% increase in motor third-party (TP) insurance premiums, with some vehicle categories potentially seeing hikes of 20–25%. The proposal is currently under review by the Ministry of Road Transport & Highways (MoRTH), and a draft notification may be released for public comments within the next 2–3 weeks.
Why Is This Increase Necessary?
There hasn’t been any change in TP premiums over the past four years, yet costs for medical (decals?), vehicle repairs, and compensation have consistently risen. As a result, insurance companies have been incurring losses:
- The minimum TP loss ratio reached 108% in FY25, as reported by the CMD of New India Assurance.
- Private insurers like ICICI Lombard and Go Digit are also facing troubling loss ratios.
The goal of this hike is to strengthen insurance companies’ financial health and ensure the sustainability of the TP insurance segment.
How Much Will It Affect Your Vehicle?
1. Two-Wheelers
For instance, with an 8% increase, a current annual premium of ₹2,800 could rise to around ₹3,024. Note that reported increases vary—smaller bikes like 75 cc could see hikes of up to 178%.
2. Passenger Cars
A mid-size car (up to 1,500 cc) with a current premium of ₹7,900 might see it grow to about ₹9,342—an additional ₹1,442 per year. Small cars (up to 1,000 cc) could see premiums rise from ₹2,100 to around ₹2,500.
Commercial Vehicles & Other Categories
The proposal also targets commercial vehicles, trucks, and buses with similar 20–25% increases, which could drive up logistics and transportation costs.
Legal & Societal Implications
- TP insurance is mandatory under the Motor Vehicles Act. Driving without it can lead to fines and legal action.
- Despite the cost rise, avoiding TP insurance puts vehicle owners at risk of significant penalties.
Financial Impact Summary
| Vehicle Type | Current Premium (₹) | Proposed Increase | New Premium (Approx. ₹) | Extra Annual Cost (₹) |
|---|---|---|---|---|
| 350 cc bike | ₹2,800 | 8–10% | ₹3,024–3,080 | ₹224–₹280 |
| 1,500 cc car | ₹7,900 | ~18% | ₹9,342 | ₹1,442 |
| Small car (≤1,000 cc) | ₹2,100 | 18–20% | ₹2,500 | ₹400 |
| Some commercial vehicles | — | 20–25% | — | — |
Benefits for Insurance Companies
- Improved financial stability and lower loss provisioning.
- Better ability to settle claims promptly, enhancing customer service.
- Strengthened underwriting capacity, enabling expanded policy offerings and coverage.
Process Ahead & How You Can Prepare
- MoRTH may complete its review of the IRDAI proposal within the next 2–3 weeks.
- A draft notification will be released for public comments.
- After reviewing feedback, the final order will set a timeline for implementation.
- Once effective, your insurer will notify you of the new TP premium at renewal.
What You Can Do
- Renew early: Lock in the current rates before the hike.
- Compare online: Use platforms like PolicyBazaar or Coverfox to find the best TP premium.
- Send feedback: If you disagree with the hike, submit your suggestions during the public comments phase.
- Plan your budget: Adjust your renewal plans to accommodate the likely increased cost.
Conclusion
The proposed 18–25% TP premium hike might feel burdensome initially, but it’s rooted in the need to stem losses endured by insurers over several years. If implemented, it’s wise to budget accordingly, renew your policy early after comparing options, and participate in public consultations to voice your views.
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