Get ready to pay less for your car insurance this financial year. The Insurance Regulatory and Development Authority of India (Irdai) has notified the premiums for third-party liability cover of motor insurance. For the first time since 2011-12, the premiums for all three categories of private cars has reduced from the previous year’s level.
While the premium for cars with an engine capacity of 1,000-1,500 cc, such as Maruti Suzuki DZire or Hyundai Elite i20, and over 1,500 cc, say, a Toyota Fortuner, saw a sharp rise of 40% last year, this time these premiums have been reduced by around 9%. Premiums for cars below 1,000 cc engines, such as Renault Kwid or Maruti Suzuki Alto, too have reduced by 10%. This was left unchanged last year.
For two-wheelers, it's a mixed bag. While the premiums for two-wheelers with engine capacity of less than 75 cc, for instance Hero Puch, has been reduced by over 20%, owners of motorcycles with capacity over 350 cc, for instance, Royal Enfield Classic 500, will see their third-party liability premiums double compared to last year.
Revisiting the premiums is an annual exercise, done mainly to keep claims and premiums collected in sync. Tushar Dhimar, national underwriting manager–retail, SBI General Insurance, said the yearly exercise of premium revision is based on data submitted by insurers on their loss experience. “The data is further worked upon to bring out the estimated ultimate liability on third-party risks based on the average awards, timeline to settle the claims, and other factors," he said. Claims of past 5 years are considered, he said.
A ‘comprehensive’ motor insurance policy has two main components—third-party liability (mandatory to have) and own-damage. The premium for third-party liability is fixed by Irdai and announced every year. The recent changes also apply only to the premiums for this coverage.
The premium for own-damage cover, which covers damage to own vehicle in an accident or theft, has not changed. Insurers decide this premium based on the insured declared value of a vehicle, along with other factors such as age of vehicle and place of registration.
Recently, insurers had reduced the own-damage premiums by 5-20%, after the implementation of Motor Insurance Service Providers (MISP) guidelines from 1 November 2017. These guidelines capped the commissions or incentives paid to MISPs or intermediaries in any form.
"With own-damage premiums also reducing over the past few months due to higher discounts by insurers, it is a win-win situation for consumers," said Balachander Sekhar, chief executive officer, RenewBuy.com.
The industry is expecting the fall in overall premiums to prompt consumers who would otherwise just buy the mandatory third-party liability cover, to now buy comprehensive policies. "It is expected that four-wheeler owners, under the 1,000 cc segment, may cover their vehicles under a comprehensive policy in place of a stand-alone third-party cover," said Anurag Rastogi, member, executive management, chief actuary and head-retail underwriting and claims, marine, crop and MSME, HDFC Ergo General Insurance.