In order to bridge the gap and curtail the losses on account of high claim ratio, insurance companies are intending to hike the premium rates for third part motor insurance, for which the approval of market regulator Insurance Regulatory and Development Authority (IRDA) is expected soon. This move was taken as auto insurance sector is largely as loss making segment with the actual claim ratio of around 200% of the premium amount and that increase in premium amount would help to minimize the losses.
Once the approval is received from IRDA, entry level segment i.e engines below 1000cc will take a worst hit as 85% increase in the premium rates is proposed in this segment. Industry will see 43% increases in the premium amount for engines over 1,500cc. Engines between the capacities of 1,000 – 1,500 cc segments will see a least increase in premium rates. The rates will hike by a minimal of 1.4% only. 3rd party insurance for vehicles used for business will also go up by 30%.
According to the information provided by the sources, the proposed hike of 85% of the premium amount for entry level segment is based on the fact that occurrence of accidents in very high in this segment with maximum number of first time owners.
Auto Insurance is a compulsory requirement for all the vehicles used whether for commercial or personal use. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability. However, own damage insurance is not mandatory for all the vehicles.
