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Premium rates for third party motor vehicle insurance is set to rise in the upcoming financial year. According to reports, the running costs of insurance companies have become higher and so have the claims, hence it becomes necessary for insurance companies to increase the premium on insurance covers.
Motor Vehicle Insurance is mandatory for every vehicle being ridden or driven on Indian roads. When a vehicle is purchased off-the-shelf, the on-road price of the vehicle includes insurance costs as well.
However, once the insurance cover expires, the owner of the vehicle has to pay the premium and insure the vehicle once again, and this process has to be repeated till the time the vehicle is being used. This insurance premium that has to be paid every year has in the past seen increases and decreases in rates.
For the financial year 2018-2019 that will end this month, the Insurance Regulatory and Development Authority of India (IRDAI) had reduced the third party premium for cars under 1,000cc but increased rates for motorcycles with a large engine capacity.
For FY 2019-2020 though, the insurance industry has been keen on an increase in premium rates. According to industry insiders, the increase would be between 10-15 percent. The IRDAI had set up a committee to decide on third party motor insurance costs for FY 2019-2020 and the committee has already submitted its report.
The new rates will be announced by the end of March 2019 and it will be effective from April 01, 2019. The same committee has also reportedly suggested a new vehicle classification and segmentation methodology and the insurance premium rates will vary for the different categories.
The IRDAI is also considering the use of technology and telematics for calculation of premium. This involves placement of a monitoring device in the vehicle that monitors and records the driving/riding habits that the vehicle is subjected to on a regular basis. This way, the more dangerously a customer drives or rides, the more he/she will have to pay as insurance premium.
Thoughts On 10-15 Percent Increase In Third-Party Insurance Premium
It is practically impossible to install a telematics device in every vehicle just to calculate insurance premium. However, it is easy to do so by tracking all the offences and violations by the particular vehicle. As a result of the new premium rates, we have to be prepared to shell out more money as on-road prices of vehicles too will go up.