Your vehicle insurance is likely to go up. Know by how much

Vehicle owners may soon have to shell out more for third-party insurance, as a proposal is under consideration to hike premiums by 18–25% for the financial year 2025–26.According to a report, the Ministry of Road Transport and Highways is reviewing a recommendation from the Insurance Regulatory and Development Authority of India (IRDAI) to revise these rates for the first time in four years.advertisementThe proposed revision includes an average increase of 18% in third-party (TP) motor insurance premiums, with steeper hikes of up to 25% suggested for specific categories of vehicles. A final decision from the ministry is expected soon.
Third-party motor insurance is legally mandatory for all vehicles under the Motor Vehicles Act and covers liability for injury, disability, or death caused to a third party. The last significant increase in these premiums occurred between FY13 and FY18, with only marginal revisions of 2–3% allowed from FY19 to FY25.IRDAI's proposal comes amid rising claim costs and inflation, which have squeezed insurers' margins. While net claim ratios for TP insurance remained stable at around 82% in FY23 and FY24, ultimate claim ratios have increased to 88% and 91%, respectively. The insurance sector argues that the premium hike is necessary to maintain financial sustainability, especially with increasing compensation payouts in accident-related cases.advertisementIn a March 2025 investor call, ICICI Lombard MD and CEO Sanjeev Mantri also indicated the likelihood of a premium revision in the upcoming fiscal year. Insurers like New India Assurance and Go Digit have already reported rising claim burdens, with incurred claim ratios climbing to 102% and 65%, respectively, in Q3 FY25.The impact of the proposed hike will be felt across vehicle categories—from two-wheelers and private cars to commercial vehicles. For instance, the current third-party insurance premium for small cars (up to 1,000cc) could rise from Rs 2,100 to Rs 2,500, while for mid-sized cars (1,000–1,500cc), the premium may increase from Rs 3,400 to Rs 4,000.In a parallel effort to boost insurance coverage in underpenetrated and rural areas, the regulator has also directed insurers to ensure adequate coverage for vehicles like tractors, goods carriers, and private cars.Subscribe to Auto Today Magazine

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