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IRDAI set to increase third-party car insurance premiums

From the past two financial years (FY 2020-21 and FY 2021-22), the IRDAI had not revised the rates. The following are the suggested Third Party Car Insurance Premiums rates for FY 2022-23.

23 Mar 2022
  • car insurance price hike
  • third party car insurance premium
  • car insurance premium

There have been various predictions about the increase in motor insurance premiums in recent years. You must have scrolled through the websites of several insurers to check the price hikes, whether it was for comprehensive insurance or third-party coverage. Much to your anticipation, the Insurance Regulatory and Development Authority of India (IRDAI) has recently proposed amendments to third party car insurance pricing. The last revisions were made in June 2019, just before the onset of the pandemic.

The Ministry of Road Transport and Highways (MoRTH) and IRDAI’s latest proposal calls for a significant increase in third party car insurance premium. However, the car insurance price hike is kept to a minimum for private and commercial cars.

The proposals were made after reviewing the last 10 years' insurance claims and premiums data. The new rates will be effective starting 1st April, 2022. 

What is third-party car insurance?

Third-party car insurance is the minimum insurance cover needed to drive a car in India. The policy covers the property loss and physical injury of a third party. Simply put, it is a pact between you and your insurer where the insurer agrees to indemnify you if you are sued or are found legally accountable for the death, injuries, or property damage caused to a third party.

In India, the rate of third party insurance is decided by the IRDAI and not by the insurance companies. The insurer is responsible for fixing the rate of standalone own damage insurance and comprehensive car insurance—own damage portion plus add-ons. The rates are set following a thorough evaluation of the claims paid out by various insurers over a period.

Let's go over the benefits of the third-party cover to understand why you should get it before the car insurance price increases.

Features of third-party liability cover

  • Third-party legal cover is mandatory by law. 
  • It compensates the third party for property damage caused by your car.
  • If a third person is injured physically, the policy will cover their medical costs.

If a third person dies or becomes permanently disabled as a result of an accident involving your car, the policy will pay a lump sum amount.

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From the past two financial years (FY 2020-21 and FY 2021-22), the IRDAI had not revised the rates. Hence, till now, the rates remained the same that IRDAI laid down for FY 2019-20.

Single-year third-party premium hike for cars

Private cars

Current

Proposed 

% Change

Cars with an engine capacity of less than 1000 cc

₹2,072

₹2,094

1%

Cars with an engine capacity between 1000 cc and 1500 cc

₹3,221

₹3,416

6%

Cars with an engine capacity of more than 1500 cc

₹7,890

₹7,897

0%

 

Multi-year third party premium hikes for new cars

Starting September 2019, the IRDAI has made it mandatory for all new car owners to purchase long-term third-party liability cover. The multi-year third party insurance for cars is for 3 years and 5 years, respectively.

However, considering that premiums have been unchanged since it became mandated, the new plans will undoubtedly impact your wallet.

Long-term third-party premium hike for new cars

Three years single premium for new cars

Current 

Proposed 

% Change

Cars with an engine capacity of less than 1000 cc

₹5,286

₹6,521

23%

Cars with an engine capacity between 1000 cc and 1500 cc

₹9,534

₹10,640

12%

Cars with an engine capacity of more than 1500 cc

₹24,305

₹24,596

1%

However, in contrast to hiked premiums, you can breathe a sigh of relief if you own an electric vehicle (EV). A discount of 15% and 7.5% is proposed for all EVs and hybrid electric vehicles, respectively. So, if you want to save a significant chunk of money, renew your policy before the third party car insurance price increases in 1st April, 2022.

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