A day after polling concluded, insurance regulator IRDAI proposed an increase in third party (TP) motor insurance premium rates for various categories of automobiles from cars, two-wheelers and school buses to trucks. The upward revision proposed for cars is in excess of 14% — for two-wheelers it is up to 21.11% and public goods carriers (trucks) over 11%. The increase recommended for school buses is 5.29% in basic rate and 5.34% per licensed passenger.
However, there will be no change in the long-term premium rates for new cars and two-wheelers — such covers come for three years in the case of new cars and five years for new two-wheelers.
By issuing an exposure draft for the current fiscal (2019-20), the Insurance Regulatory and Development Authority of India (IRDAI) on Monday put to rest any expectations on continuing with the existing premium rates. Usually, the new rates come into force on April 1. It is preceded by an exposure draft that is placed in the public domain seeking comments. The revision proposed in the draft generally becomes the final tariff.
This year, in March-end, IRDAI had extended the validity of the 2018-19 rates, beyond March 31, until further notice. The present exposure draft is open for comments till May 29. Subramanyam Brahmajosyula, head — Underwriting and Reinsurance of SBI General Insurance — said the increase proposed for most classes of vehicles suggests that premiums have not been keeping pace with the cost of claims in the past and hence further price correction is required.
The motor TP rates proposed were the result of a scientific exercise and have been arrived at by relying on actuarial methods and after considering premium and claims for a period of seven years, he explained. In revising the rates, IRDAI has opted to maintain status quo for a few category of vehicles and also proposed a discount of 15% on the premium rates for electric private cars and electric two-wheelers.
Shanai Ghosh, chief — Marketing and Commercial Strategy, Edelweiss General Insurance, said as in the past few years, IRDAI had proposed third party motor rate increase on the basis of standard actuarial calculations.
“The increase varies by the vehicle segment and reflects the growing cost of TP claims as experienced by the industry. Overall a positive development for the general insurance industry provided the actual rate increase is in line with the exposure draft,” she said. “It is encouraging to see IRDAI create a separate segment for school buses, which has had a favourable claims experience.”
IRDAI says school buses are those registered in the name of the school and used only for transporting students to or from a school or on school-related trips.