Motor insurance will soon cost more. Car and bike owners will have to pay about 10% more on new covers, while truck owners will have to shell out around 80% extra under the new price structure proposed by the insurance regulator.
The Insurance Regulatory and Development Authority (IRDA) has published its proposed new tariff for third party motor insurance-the cover which compensates accident victims and has to be mandatorily purchased by all vehicle owners.
The IRDA, however, has not notified the date when the tariff comes into force. The IRDA has set January 17 as the deadline to receive comments from all stakeholders, after which it will announce the date on which the new prices will become effective.
The regulator has revised prices considering that third party motor insurance faced a deficit that could touch Rs 2,000 crore. While the premium for private vehicles will rise, it will not be as steep as that for trucks. For a sub-1000cc vehicle, the increase will be from Rs 670 to Rs 740, while for cars up to 1500cc the premium will rise from Rs 800 to Rs 880. In the case of trucks weighing up to 7500 kg the premium will go up from Rs 5,580 to Rs 10,040.
The IRDA has also recommended to the government that the concept of limited liability, which was discontinued in 1988, should be reintroduced. The regulator has recommended that Motor Vehicle Act be amended to introduce a limitation period for filing compensation claims. Third party insurance is the only business where rates are fixed by the regulator.
This is also the only policy where insurance companies receive a fixed premium but their liability is unlimited as claims are paid on the basis of compensation awarded by the motor accident claims tribunal.
Four years ago, the IRDA had revised rates on third party insurance substantially to wipe out the deficit. However, the regulator was forced to roll back the increase by 70% after a nationwide stir by truckers sent food prices soaring.
Premium on third party insurance has been a contentious issue.