Third-Party Motor Insurance Premiums to Rise from April

fast Summary

• Insurance companies in Mumbai anticipate a 15-20% hike in third-party (TP) motor insurance premiums from April 1,citing rising claims adn stagnant rates over the last five years.
• The TP award inflation is estimated to be at 11-12% annually, while average premium increases have been limited to 2-3% between FY19 and FY25.
• Net claims ratios for motor TP were at 82% for FY24 and FY23; ultimate ratios stood at 88% and 91%, respectively.
• New India Assurance reported its incurred claim ratio rising to 102% in Q3 of this fiscal vs.last year’s figure of 93%, while Go Digit’s loss ratio rose from 61% to 65%.
• Premiums currently vary by engine size:

– Small cars up to 1,000cc: ₹2,100 → projected increase to ₹2,500.
– Mid-sized cars (1,000-1,500cc): ₹3,400 → projected rise to ₹4,000.

• Third-party insurance is mandatory under the Motor Vehicles Act of India for liability related to injuries or deaths caused by vehicles.

!Third-party insurance coverage

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Indian Opinion Analysis

The anticipated hike in third-party vehicle insurance premiums highlights ongoing challenges within India’s motor insurance sector. Increasing claims ratios combined with lagging premium adjustments have left the industry grappling with profitability concerns. While regulators previously capped annual hikes at minimal levels (around 2%-3%), inflation-driven awards seem necessitating sharper corrections now.

This shift may burden vehicle owners financially but aligns with broader goals of ensuring sustainable practices within India’s motor TP ecosystem. Furthermore, higher rates could incentivize improved underwriting accuracy amidst growing liabilities-a crucial step considering India’s mandatory nature of third-party cover under its road safety laws.Insurers must balance these adjustments carefully alongside accessibility mandates set forth by IRDAI that aim at rural penetration expansion without excessive financial burdens on underserved segments. This advancement underscores larger dynamics between regulatory balance and market viability within India’s evolving financial systems.

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