Giving in to the long pending demand of the general insurance companies, the Insurance Regulatory and Development Authority (IRDA) of India has hiked the third party motor insurance premium by 10-65% across private and commercial vehicles with effect from April 25, 2011. The insurance regulator has also agreed to the industry demand of annual review of third party premium rates.
The premiums for private cars and two-wheelers have been increased by 10% while for commercial vehicle the hike is 65%.
KG Krishnamoorthy Rao, managing director and chief executive officer, Future Generali India Insurance, though welcoming the hike, said that the quantum of the increase is not sufficient given the loss ratio in the commercial vehicle segment at 190%. "Ideally, the increase should have been 85-100%," he added.
Earlier talking to MONEY TODAY, Amarnath Ananthanarayanan, chief executive officer, Bharti AXA General Insurance, had said the third party premium in the commercial sector should be increased at least by 80%.
The third party insurance premium rates have been increased after a gap of 5 years. In a circular issued on April 15, 2011, the insurance regulator observed that "long intervals between rate revisions cast an avoidable strain on policyholders as well as on the insurance companies. Premiums need to be reviewed regularly depending upon the average claims which have been awarded by the various courts, frequency of claims for each class of vehicle and inflation amongst other factors."
A Bajaj Allianz General Insurance spokesperson said that the fact that Irda has agreed to review the third party rates on yearly basis comes as a big relief to the industry. There are two kinds of motor insurance cover - cover against damage to one's own vehicle (own damage insurance) and third party insurance which covers the insured person if he is sued or held legally liable for injuries or damage done to a third party. Third party motor insurance is mandatory by law and the premium rates are still under government control.