How will the rise in motor insurance premium affect you?
NEWDELHI: The insurance regulator has proposed an increase of up to 50% in third-party (TP) liability premiums of motor insurance holders. Will the move impact you? Read on to know. FIXED PREMIUM OR FREE PREMIUM A motor insurance policy has two components. TP liability and own damage (OD). TP liability part is the one that is fixed by the Insurance Regulatory and Development Authority of India (Irdai). This is mandatory by law for any motor vehicle registered in India. This does not cover the owner of the vehicle or the vehicle itself. It is to cover the liability for the damage caused to a third party. The damage could be in the form of injury, death of an individual or damage in case of an accident. The premium for this insurance is announced by the regulator each year.
The OD part is optional and it covers damage to your vehicle in case of an accident. This is the part of the insurance that also covers theft. Insurers are free to price it. What you buy is a comprehensive car insurance policy that bundles both TP and OD covers. INCREASE IN PREMIUM The recent proposal by the insurance regulator, when notified, will result in an increase in overall premium for you if you have a car with an engine over 1000cc or a twowheeler with engine over 75cc. For users of cars over 1,000cc, the TP premium would go up by 50%. For two-wheelers over 150cc engines, the impact will be in excess of 40%. So, for an 800 cc car, the premium will continue to remain the same in 2017-18 as in 2016-17. For instance, the TP premium for a Maruti Suzuki Swift bought in 2015 (with a 1197cc engine) is ₹2,387 now. When the higher premium is notified, this could go up by 49.98% to ₹3,580, a rise of ₹1,193. However, for a Hyundai Eon (with a 814cc engine) bought in the same year, the TP premium is ₹2,205, which will continue to remain same.
“The impact on total premiums (TP+OD) could be in the range of 30%,” said Indraneel Chatterjee, co-founder, RenewBuy.com, an online motor insurance broker.