MoRTH against hiking third party motor insurance premia

The claims paid data in respect of each of the accident years starting from the year 2011-12 up to 2021-22 has been considered. Besides, gross written premiums for the FY 2011-12 to 2021-22 have been considered. The status quo on TP rates will impact the cash flow of insurers, said an official.

The ultimate claims cost of respective segment for each accident year has been estimated using the actuarial technique in order to arrive at the premium rates, the ministry said.

The ministry has proposed reduction of premium in a couple of categories including three wheelers used for carrying passengers with carrying capacity exceeding six passengers particularly for educational institutions where the basic premium will fall from Rs 13,729 to Rs 12,192 and per passenger, it will fall from Rs 839 to Rs 745.

For an owner of three-wheeler vehicles used for carrying passengers for hire or reward with carrying capacity not exceeding 6 passengers (except e-rickshaw), the premium will fall from Rs 2,539 to Rs 2,371. Similarly, for three-wheeler e-rickshaw, the premium will fall from Rs 1,648 to Rs 1,539, and for four or more wheeled e-vehicle used for carrying capacity exceeding six passengers for educational institution, the premium will fall from Rs 11,670 to Rs 10,363.
Vintage cars will continue to avail 50 per cent discount on premium while a discount of 7.5 per cent on premium will be allowed for hybrid vehicles.

The combined ratio (CR) of the motor TP segment has never fallen from 140 -150 percent in all these years for the industry. The losses in this segment wipe out the total profitability of a general insurer and the company incurs overall underwriting loss, leading to the insurer to depend on the investment income for a net profit.

Before Covid, motor used to be the largest portfolio for any company and mandatory motor TP remained the highest premium grosser. Most of the claims out of motor TP cases end up in courts and take a long time to be settled and India follows a principle of unlimited liability for settling any motor TP cases.

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However, the motor TP portfolio generates a large amount cashflow for a general insurer that helps the company to have investment income. Industry observers point out that not hiking motor TP premium considered as `safe cushion’ for the general insurers will force them to find ways to provide covers to uninsured vehicles constituting almost 50 per cent of total automobiles in the country.