The Insurance Regulatory and Development Authority of India (IRDAI) is unlikely to make any revision to the premium rates for motor third party policies this year. Earlier, the insurance regulator on March 27 had extended validity of existing premium rates beyond March 31, 2020, until further notice.

Any motor insurance policy has two major components: Own damage cover and third party cover. Own damage cover helps insured stay covered against the damages caused to the vehicle due to accidents like fire and theft.

Third party offers coverage against legal liability caused to a third party due to your car or vehicle. In simple terms, third party insurance covers injury or death caused to a third person by your vehicle along with damage caused to a property.

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Motor third party insurance premiums may go up by up to 15% from April 1

A status-quo on motor third party premium rates would come as a setback for general insurance companies which were expecting an upward revision in motor third party rates. On the contrary, it would be positive for auto companies which are already struggling with an unprecedented decline in sales and an upward revision in motor third party premium rates would have made things worse.

Every year the insurance regulatory body assesses the claims data for the previous financial year in order to make an upward or downward revision in motor third party premium rates for the coming financial year.

This year as well, IRDAI had floated a consultation paper suggesting an average 10 percent hike in motor third party premium rates across categories, which according to sources won’t be implemented now as a status-quo is likely to be maintained.

According to sources, the primary reason for not revising motor third party premium rates has been a drop in motor claims in the current financial year so far. Also, sources added that the regulator in not in the favor of burdening the auto industry with higher premiums which would discourage new sales.

First Published:Aug 19, 2020 7:56 PM IST