The proposed hike in motor third-party premium after two years will impact consumers but benefit the industry, experts said, adding that the quantum of inflation is very high.
Ashwini Dubey, Head- Motor Renewal, Policybazaar.com said that customers who want to avoid hike in premium can renew their policy before the new rates come into effect from April 1, 2022.
“With the increase in the number of third party claims after an initial decline during the Covid-19 pandemic, the GIC had written to IRDAI, proposing a mandatory increase in TP rates, which has now been accepted. This will lead to an increase in the insurance premium for both Comprehensive and third parties as TP is a part of Comprehensive. Since TP insurance is mandated by law, it will affect all customers,” Dubey said.
While third-party premium rates are revised by IRDAI on an annual basis, these were put on hold in 2020 and again in 2021 to provide relief to policyholders during the pandemic.
‘Competitive intensity’
“As such, the impact of the increase should be viewed through competitive intensification. If new motor sales continue to grow at a slow pace, aggressive insurers may want to pass on higher TP rates through lower OD prices. However, given the already high overall loss ratio of the industry (the overall loss ratio for the industry was at a cyclical high of 93 per cent as of H1 FY22), we expect profitability to improve following this increase. We do. A report by ICICI Securities said.
The government had on March 4 issued a draft notification of motor third-party premium rates for the financial year 2022-23 for stakeholders’ consultation.
Significantly, it has proposed a discount of 15 per cent on electric private cars, electric two wheelers, electric goods carrying commercial vehicles and vehicles carrying electric passenger. A rebate of 7.5 per cent is also proposed on Motor TP premium rates for Hybrid Electric Vehicles.
Published on
March 07, 2022