Lakhs of vehicle owners across the country may have to pay more for buying the mandatory insurance cover — third party motor cover — for their vehicles.
The third party motor insurance premium is likely to go up within the range of 15-50 per cent in 2013, the second hike in the last one year.
“The hike may come within a fortnight . The premium may increase between 15-50 per cent in various vehicle categories,” said the chairman of a public sector insurance company.
As the third party motor insurance is still regulated by IRDA, it has already decided to hike the rates to make up the huge losses in this portfolio — a lion’s share of total losses of over Rs 10,000 crore suffered by the insurance sector is accounted by third party motor cover.
“Our claim ratio is 175 per cent in the third party motor segment,” said G Srinivasan, CMD, New India Assurance.
In fact, the earlier hike which was done in March 2012 was disputed by the transporters’ association which had fought a legal battle with IRDA and general insurers in Calcutta High Court. However after eight months of litigation, the court had passed verdict in favour of the hike.
Earlier in 2012, while asking the domestic general insurers to hike the provisioning — capital to be set aside to pay the future claims as it takes years settle claims under this category — against the third party motor portfolio, the IRDA had assured general insurers that it will allow them to hike the third party motor rates gradually.
On the possible opposition by the transporters’ association to the hike, the CEO of another general insurance company, said, “There is a set formula, which the IRDA is following and after Calcutta High Court verdict there shouldn’t any problem in hiking the rates.”
After the negotiations with the transporters, IRDA had incorporated an automatic provision in the order on premium revision based on a formula that was implemented from April 1, 2012. At current levels, the premium is well below the break-even level for the portfolio, the industry has accepted the revisions with the expectation that the IRDA would review the position.