logo
ENع
Govt plans 10% hike in third-party motor insurance premium

Govt plans 10% hike in third-party motor insurance premium

Time of India3 days ago

Insurers had earlier written to the government and regulator seeking a 5-15% increase starting April 2025, citing mounting pressure from rising court awards, upfront claim payments, and a distorted claims cycle during the pandemic years. "On an accident-year basis, the motor third-party segment continues to bleed. A substantial hike is needed," a senior industry executive said.
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
MUMBAI: Talks to raise third-party motor insurance premiums have picked up pace again, with the ministry of road transport and highways considering an average increase of around 10%, people familiar with the matter told ET. The increase could be higher in certain loss-making segments, such as commercial vehicles . For categories such as school buses, the increases may be minimal or even held back entirely."Talks have resumed between the ministry and the insurance regulator to increase the third-party motor rates, which could go up on an average 10%," said a source close to the development. "For certain segments like school buses, the hike may be minimal or held back entirely to avoid public backlash."Insurers had earlier written to the government and regulator seeking a 5-15% increase starting April 2025, citing mounting pressure from rising court awards, upfront claim payments, and a distorted claims cycle during the pandemic years. "On an accident-year basis, the motor third-party segment continues to bleed. A substantial hike is needed," a senior industry executive said.Premium rates for third-party motor cover-mandatory under the Motor Vehicles Act-are revised annually based on historical claims data. The ministry has been mandated to prescribe base premium and liability of an insurer in relation to third-party premium in consultation with the insurance regulator, the Irdai.But since 2018, increases have mostly remained capped at 2-3%, with no revision in 2021 and only marginal tweaks in 2022 and 2023. The net claims ratio stood at 82% in FY24 and FY23, with ultimate loss ratios of 88% and 91%, respectively.Currently, a third-party premium for small cars (up to 1000cc) is ?2,100, while the premium for mid-sized cars (1000cc-1500cc) is ?3,400. Insurers collected a total premium of ?54,455 crore under motor third party in FY23-24.The final increase, however, will take effect either in the middle of this financial year or beginning of FY26-27."There is no provision to revise the rates, retrospectively. The earliest they can implement it is from April 1, 2026, or possibly mid-year from October 1, 2025," one of the people cited earlier said.Commercial vehicles have been a particular pain point. Claims have surged due to a mandatory ?1.5 lakh cashless hospitalisation rule for road accident victims during the "golden hour," regardless of whether the accident involved a hit-and-run or a covered vehicle. "This cashless rule applies to all road accidents. And while the final compensation may take years, the upfront payouts are immediate," said another executive.

Hashtags

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Contract maker Zetwerk set to pump Rs 500–800 crore for component making
Contract maker Zetwerk set to pump Rs 500–800 crore for component making

Time of India

time5 hours ago

  • Time of India

Contract maker Zetwerk set to pump Rs 500–800 crore for component making

Zetwerk is looking to pump in Rs 500–800 crore as the Bengaluru-based unicorn embarks on manufacturing printed circuit boards (PCBs), enclosures and electromechanical components such as heat sinks and sensors, said its co-founder Rahul Sharma 'We are very excited about the component PLI (production-linked incentive) and have seen a lot of traction,' he told ET. While the application for the government's PLI scheme is being prepared, Zetwerk has forged technology tie-ups with companies in Taiwan and is eyeing setting up manufacturing plants over the next one year. 'We are in talks with a Taiwanese company for PCBs and have gotten into a definitive agreement with them," Sharma said. "We are also speaking to a South Korean company. And for products like enclosures, we are partnering with an Indian company since that capability already exists here. Within enclosures, we are looking at enclosures for laptops and non-Apple mobile brands and products." ETtech Live Events Zetwerk is also evaluating potential collaborations with Chinese companies, particularly in specialised areas like PCBs, he said. Discover the stories of your interest Blockchain 5 Stories Cyber-safety 7 Stories Fintech 9 Stories E-comm 9 Stories ML 8 Stories Edtech 6 Stories 'Recent policy developments have signalled a pragmatic approach toward allowing minority partnerships with Chinese firms, recognising the value they can bring in bridging critical technology gaps and supporting India's self-reliance goals. Once we receive the necessary government approvals, we will move forward with these partnerships,' he said. Once the necessary approvals are obtained, Zetwerk would set up the manufacturing units, Sharma said. 'We are already present in Uttar Pradesh, Haryana, Tamil Nadu and Karnataka with plants in the electronics sector. Now, with the component PLI, we would be setting up new plants and are in close talks with a few of the state governments,' he said. While Sharma did not name the states that Zetwerk was engaging with, he said none of them had reached a definitive agreement yet. He also said that segments like electromechanical components, unlike PCBs, can be housed within the existing units. 'PCBs cannot be stationed at the same place where our existing EMS (electronic manufacturing services) factories are stationed,' he said. 'It will definitely be in a different place because it has different requirements for polishing control, power and other factors. Same goes for enclosures where we don't have to have these facilities situated in our existing clusters." Sharma further said, 'We have also hired one of the big four firms to help us prepare an application which is suitable for the government to evaluate.'

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store