Third party car insurance set for possible increase
Car owners must brace themselves for a possible increase in premiums of third party motor insurance. The IRDA is considering a proposal to revise rates for the financial year 2014-2015.
At present, third party motor insurance is very heavily regulated and the premium you pay for this type of insurance is practically the same across all insurers. But several companies have been asking for a de-regulation or revision in the way that premiums are calculated.
According to a report by The Hindu BusinessLine, risk-based pricing on third party motor insurance is set to be introduced. This means that the proposed motor insurance regulations will allow insurers to set premiums – presumably, different premium will be set for vehicle classes.
Apart from this, rates could also go up starting in April this year. The IRDA has decided to revise third party motor insurance premium for the financial year 2014-2015 based on a few factors such as cost inflation index, fixed expenses and the frequency, severity and variable expenses for different classes of vehicles.
BusinessLine has quoted M Ramprasad, member (non-life) of the IRDA as saying, “We have taken a policy on freeing pricing and are working on a roadmap for de-tariffing third party premium rates.”
What this might mean
Since only the type (or class, or sub-class) of vehicle will be considered for insurers to set their premiums, those labelled high-risk could attract higher premiums. So if you have a vehicle which is seen as more of a liability to insurers, you could be paying higher premiums.
This could also lead to less demand for certain types of vehicles, indirectly affecting supply. This means that manufacturers could potentially suffer losses with regard to certain vehicle sub-classes, or that competition in those sub-classes will increase greatly.
Insurers could also offer bonuses or discounts to those who have lodge low claims (or no claims at all).
If these rates are de-tariffed, it is possible that each insurer could offer different premiums depending on what sort of policies they set and what sort of things are covered and to what extent. This could make chosing one insurer over another more difficult.