Changes

Here are some of the important points from the IRDAI notification issued on 4 June.

• Since third-party insurance is mandatory as per the law in India, insurance companies have to make sure that it is made available at their underwriting offices and through all available channels of distribution including online.
• Non-availability of insurance or using methods to deny or delay an insurance cover by the insurer will be considered seriously by the IRDAI.
• Current insurance policies cannot be cancelled or replaced with fresh ones that come with new premium rates.
• The new rates will have to be prominently displayed at underwriting offices and on the website of insurers so that the public can have access to view it.

Comparison

Here is a comparison of the old and new third-party motor vehicle premium (source: IRDAI website):

Cars

Two-wheelers

How will your premium burden increase?

The Motor Vehicles Act 1988 requires every vehicle in the country to have a third-party insurance cover.

Until last year, vehicle owners could opt for one-year policies with annual premium charges. However, the IRDAI made it mandatory for four-wheelers and two-wheeler vehicles to have three-year and five-year third party insurance policies, respectively. These policies can be clubbed with damage cover.

After the recently made changes, the biggest hike in premium has been seen on two-wheelers with engine capacity between 150cc and 350cc at 21.11 percent. Among cars, the highest hike in premium was made on four-wheelers with less than 1000cc capacity.

No changes were made on third-party insurance premium paid on cars and two-wheelers with engine capacity exceeding 1500cc and 350cc respectively.

Overall, this may feel like an increase in the burden of premium paid towards third-party as well as own vehicle damage cover. However, vehicle owners usually get a discount on damage cover insurance premium when insurance wasn't claimed in the previous term, on account of holding a good driving record.

A discount is also given on account of the depreciation in car value.

Hence, the drop in damage cover premium should offset the increased burden from third-party insurance.