IRDA notified Upward Revision of Premium Rates for Motor Third Party Liability Only Cover

The Insurance Regulatory and Development Authority of India (IRDA) notified in March 2012 that premium rates for motor third party liability only cover will undergo an upward revision beginning 1 April 2012. IRDA listed the third party liability premium rates for vehicles of assorted categories.

The IRDA had done an extensive actuarial review of the premium rates for motor third party liability only cover for different categories of vehicles for years 2007-08 to 2010-11.

The premium rates calculated on the basis of a specified formula is to be notified every financial year by the IRDA. The formula has been devised taking into consideration the experience measured in terms of average claim amounts, frequency and expenses involved in servicing the motor third party business. The rates for 2012-13 were calculated by using the average growth rate in severity assuming that the average frequency remains constant.

The IRDA premium notification covers a range of vehicles such as trailers, four-wheeler passenger carriages (depending on their engine capacity and seating capability), motorised two- and three-wheeler vehicles for carrying passenger for hire, special types of vehicles etc.

All vehicle owners will now have to compulsorily buy third party cover to compensate for any damage or liability caused to third party's life or property in the event of an accident. A comprehensive motor insurance comprises own damage as well as third party cover.

The measure was adopted by the IRDA in the backdrop of huge loss run by general insurance companies, estimated at over Rs.10000 crore, on third party cover.

Newly-notified Rates Private Car Owners

According to the newly-notified rates, private car owners would have to pay different rates of premium depending on the size of the vehicles. Those who own cars up to 1000 cc engine capacity will have to shell out a third party premium of Rs.784. In the case of cars with engine capacity of above 1000 cc and up to 1500 cc, the premium will be Rs.925. For cars exceeding 1500 cc, it will be Rs.2853.

Premium for two-wheelers

The premium for two-wheelers below 75 cc was fixed at Rs.350; for above 75 cc and up to 150 cc vehicles Rs.357; for above 150 cc and up to 350 cc vehicles Rs.355; and for vehicles above 350 cc Rs.680.

For goods-carrying private and public three-wheelers, the premium rates were fixed depending on their load-carrying capacities.

Insurance

The insurance regulator directed insurers to ensure that motor third party insurance is made available at their underwriting offices. Insurers were also directed to process any request for insurance expeditiously.

All complaint with respect to non-availability of insurance or use of methods to deny or delay the client seeking insurance cover will be strictly dealt with.

The IRDA also clarified that insurers can't cancel the current insurance and issue fresh policies to effect new premium rates.