#IRDAI #MotorInsurance #ThirdPartyPremium #InsuranceSector #VehicleInsurance #IRDAINews #MotorTP #InsuranceUpdate #IndiaFinance #AutoInsurance #InsuranceHike
New Delhi: India’s insurance regulator, the Insurance Regulatory and Development Authority of India (IRDAI), is preparing to raise motor third-party (TP) insurance premiums for the first time in four years, according to sources familiar with the development. The revision, expected to be announced in the coming weeks, comes amid rising underwriting losses for general insurers and sustained pressure on their profitability.
Motor TP insurance is mandatory for all vehicle owners in India and provides coverage against legal liabilities arising from accidental death, injury, or property damage caused to third parties. While own-damage (OD) cover protects the vehicle owner’s own vehicle, TP insurance specifically safeguards third parties affected in an accident.
Why the Hike Is Under Consideration
The last revision in TP premiums took place in 2020. Since then, the rates have remained unchanged despite significant changes in the risk environment, vehicle density, and accident statistics. In FY25, motor TP insurance accounted for 60% of all motor insurance premiums and about 19% of total general insurance premiums in India.
Over the past few years, the loss ratios in the motor TP segment have surged, highlighting the mismatch between premium collections and claims payouts. The loss ratio is the proportion of claims paid to premiums collected, and a figure above 100% means insurers are paying more than they earn from that business.
For instance:
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New India Assurance, India’s largest general insurer, posted a loss ratio of 108% in FY25.
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ICICI Lombard reported 64.2%.
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Go Digit recorded 69%.
Such figures underline the urgent need for premium adjustments to ensure long-term sustainability for insurers. Without corrective measures, underwriting losses could continue to erode financial health and limit the ability of insurers to invest in service quality and claim settlement infrastructure.
Larger Vehicles to See Steeper Increases
Industry insiders suggest that the proposed hike will likely be differential, with larger passenger vehicles and commercial trucks bearing sharper increases. This reflects their higher risk profile due to:
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Greater potential for accident-related damage.
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Higher repair costs.
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Greater liability exposure in case of fatalities or severe injuries.
In contrast, two-wheelers and smaller private cars may see more moderate hikes to avoid overburdening individual consumers.
Impact on Consumers
While the hike will help insurers restore profitability, it will inevitably increase the cost of vehicle ownership. For families or small businesses operating multiple vehicles — particularly larger commercial vehicles — the impact could be substantial.
However, experts argue that in the absence of revisions for four years, the proposed changes are overdue. Ramesh Kumar, an auto insurance analyst, notes:
“Motor TP premiums have not kept pace with inflation, accident severity, or rising compensation awarded by courts. This revision is more about catching up than imposing an extra burden.”
Economic and Industry Context
The period from 2020 to 2024 was marked by significant volatility in India’s automotive and insurance sectors. The COVID-19 pandemic temporarily reduced vehicle usage, leading to lower claims. However, as mobility returned, accident frequency climbed again.
Meanwhile, inflation in spare parts, medical costs, and legal settlements has increased the average claim size. The Motor Vehicles (Amendment) Act, 2019 also introduced higher penalties and compensation norms, further increasing insurer liabilities.
Given these dynamics, maintaining the same premium levels since 2020 has contributed to widening losses in the TP insurance segment.
Regulatory Balancing Act
The IRDAI faces the challenge of balancing two priorities:
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Ensuring insurer viability by aligning premiums with risk and cost structures.
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Avoiding excessive financial burden on consumers, especially in a price-sensitive market like India.
The expected hike may be phased or tiered over two years to soften the immediate impact.
What’s Next
Sources suggest the official announcement could come before the festive season, which traditionally sees a surge in vehicle sales. Implementing the revised premiums during this period could ensure that new policies reflect the updated rates from the outset.
The revision will also likely trigger a re-evaluation of bundled insurance packages offered by automakers and dealers, potentially altering the cost structure of new vehicle purchases.
For insurers, the hike will provide some relief, but it is unlikely to eliminate losses entirely, especially if accident rates and legal claims continue to rise. As such, industry experts believe IRDAI may also explore complementary measures such as:
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Stricter enforcement of road safety norms.
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Incentivising safer driving through telematics-based pricing.
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Promoting faster claim resolution to reduce legal costs.
Consumer Tips Ahead of the Hike
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Renew early: Vehicle owners whose policies are nearing expiry may consider renewing before the official hike to lock in current rates.
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Consider add-ons wisely: While TP is mandatory, own-damage and add-on covers (like zero depreciation or roadside assistance) remain optional — but valuable for comprehensive protection.
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Review usage patterns: For vehicles with low usage, exploring pay-as-you-drive options could help offset the impact of the premium increase.
Conclusion
The proposed motor TP premium hike, the first in four years, marks an important regulatory intervention to address growing financial stress in the general insurance sector. While it will raise costs for consumers — especially those with larger vehicles — it is aimed at ensuring the continued availability of TP coverage, which is a legal and social necessity.
With road safety challenges, rising vehicle ownership, and inflationary pressures unlikely to abate, the revision could be the start of a more dynamic and risk-based approach to TP pricing in India.
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