Car insurance premium: The Finance Ministry has supported the proposal of insurance regulator IRDAI, which has recommended an average increase of 18% in motor third party (motor TP) insurance premium.
The Finance Ministry has backed the proposal of insurance regulator IRDAI, which has recommended an average hike of 18% in motor third party (motor TP) insurance premiums. CNBC-TV18 got this exclusive information from sources.
What is motor third party insurance?
This is a mandatory insurance policy that covers damages caused to third parties (such as pedestrians, other vehicles, etc.) in road accidents. This insurance cover does not cover damages to the car or bike owner, it only covers damages caused to third parties.
Important points-
The Finance Ministry has in-principle approved the IRDAI’s proposal for an 18% premium hike. Now the Ministry of Road Transport (MoRTH) may take a decision on this proposal in the next 1-2 weeks. There has been no increase in motor TP premium since 2019.
What will be the impact of this?
In FY25, Motor Third Party Insurance:- accounted for 60% of the total motor insurance premium and 19% of the general insurance industry. Current loss ratio (loss ratio – amount of claims paid compared to premiums received) of insurance companies:
ICICI Lombard: 64.2%
Go Digit: 69%
New India Assurance: 108% (ie more than 100)
According to analysts, an 18% growth could improve the insurance industry’s combined ratio by 400–500 basis points (bps), which could improve the profitability of companies.
Why is this increase necessary?
There has been no growth for four years. But there has been a continuous increase in claims. The third party portfolio of most government companies is running at huge losses. This growth is considered important for the sustainable profitability of insurance companies.
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