Proposal of Increase in Vehicle Insurance Premiums

Posted on: May 4, 2022 | | Written by:

Proposal of Increase in Vehicle Insurance Premiums

Proposal of Premium Rise in Vehicle Insurance

The government has issued a proposal that might lead to an increase in car insurance premiums if the associated stakeholders accept it. The government’s draft proposal is supposed to mark an increase in third-party coverage. If this proposal gets passed, then the car owners need to expend 21% more for third-party cover. Although these insurance premium rates are generally revised every year, however, the Indian government has kept them static for the last two years. Due to the outbreak of the Covid-19 pandemic, the government was forced not to increase the premiums for these last two years. It was revised last back in the financial year 2019-’20. This can be the perfect justification behind undertaking such a step now.

It must be mentioned here that the third-party insurance premiums get annually revised by the Insurance Regulatory and Development Authority of India. The third-party insurance is governed by the law, which implies that if this particular proposal gets passed, the vehicle owners will have to bear the increased premium costs. The maintenance of third-party insurance is compulsory in India, which covers the damage to others in case of any road accident. You can maintain your own damage cover too alongside.

However, if you wish to forego this increase for the year, you can try renewing your car insurance plan before the proposed date of the implementation of this new rule on April 1, 2022. This proposal not only deals with enhancement. You will notice a 5% decrease in the premiums for two-wheelers with an engine capacity ranging between 75-150 cc. The premium costs for private cars above the engine capacity of 1500 cc, will observe a minimal enhancement of a meagre INR 7.

Proposed premium rates for the financial year 2022-’23

As per the new proposal, private cars with a capacity of 1000 CC, will attract a third-party premium of INR 2094, compared to the previous INR 2072 for the FY 2019-’20. The private cars, ranging in capacity between 1000 cc to 1500 cc, will need a premium payment of INR 3416, compared to the previous INR 3221. The private cars above 1500 cc capacity will attract a third-party premium of INR 7897, compared to the previous INR 7890, back in 2019-’20.

Here are the proposed rates of the increased premium rates in detail:

PRIVATE FOUR-WHEELER (Single year, single premium)	OLD PREMIUM RATE (INR)	NEW PREMIUM RATE (INR)	% HIKE
Up to 1000 cc	2072	2094	1
From 1000 cc to 1500 cc	3221	3416	6
Above 1500 cc	7890	7897	0

PRIVATE TWO-WHEELERS (Single year, single premium)	OLD PREMIUM RATE (INR)	NEW PREMIUM RATE (INR)	% HIKE
Up to 75 cc	482	538	12
From 75 cc to 150 cc	757	714	-5
From 150 cc to 350 cc	1193	1366	15
Above 350 cc	2323	2804	21

As per the existing mandate, new vehicle owners must buy a long-term insurance coverage of 3 to 5 years. IRDAI has not revised the long-term premium rates of new vehicles since FY 2019. However, this time, it has plans to hike the long-term premium rates of both the new two-wheelers as well as new four-wheelers.

The proposed differences in the long-term car insurance premium rates for the financial year 2022-’23 are as follows:

NEW PRIVATE FOUR-WHEELERS (3-year single premium)	OLD PREMIUM RATE (INR)	NEW PREMIUM RATE (INR)	% HIKE
Up to 1000 cc	5286	6521	23
From 1000 cc to 1500 cc	9534	10640	12
Above 1500 cc	24305	24596	1

NEW TWO-WHEELER (5 years single premium)	OLD PREMIUM RATE (INR)	NEW PREMIUM RATE (INR)	% HIKE
Up to 75 cc	1045	2901	178
From 75 cc to 150 cc	3285	3851	17
From 150 cc to 350 cc	5453	7365	35
Above 350 cc	13034	15117	16

As per the new proposal, there are provisions for a discount of 15 % is provided for, electric two-wheelers, private electric cars, electric goods carrying vehicles and electric passenger carrying vehicles. For hybrid electric vehicles, there is a proposed discount of 7.5%.

Conclusion

Although the boost in the car insurance premium rates for four-wheelers seems nominal, there is a considerable hike in the premium costs of two-wheelers, especially for low-cost bikes and scooters lower than 75 cc capacity. Experts believe that though these hikes may seem minimal, they can still affect the demand for these vehicles, considering the lump sum payment of 3 or five years including GST. Since the lockdown, the automobile industry is functioning on a loose note. The increase in the car insurance premium rates might further aggravate the situation, affecting the insurance sector along with.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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