Third-party insurance premiums to increase from June 1, 2022

Following a two year intermission, the government of India has now announced an increase in the insurance premiums for third-party motor insurances.

Third-party insurance premiums to increase from June 1, 2022

With effect from June 1, the premiums for several segments of vehicles will become a little expensive. Following this news, some of the industry experts have raised their concerns over the decision of the government as they believe that it will adversely impact the sales of automobiles, especially the two-wheeler segment as it is already struggling with low market demand.

With this new hike imposed by the government, the revised rates for the private cars with an engine capacity of 1,000cc will incur rates of Rs 2,094 compared to Rs 2,072 in 2019-20. Meanwhile, the rates for private cars with engine capacity between 1,000cc and 1,500cc will be increased from Rs 3,221 to Rs 3,416. Although as a sigh of relief, the rates for cars above 1,500cc will see a drop in premium from Rs 7,897 to Rs 7,890. These new rates have been issued by the Ministry of Road Transport and Highways (MoRTH).

Furthermore, two-wheeler owners would also have to pay a surcharge of Rs 1,366 for bikes under 350cc and Rs 2,804 for bikes beyond 350cc. Hybrid electric cars will be eligible for a 7.5 percent rebate on the premium. Electric private automobiles with a power output of less than 30 KW will be charged a premium of Rs 1,780, while those with a power output of more than 30 KW but less than 65 KW would be charged a premium of Rs 2,904.

In 2019-20, the premium for goods-carrying commercial vehicles weighing more than 12,000 kg but less than 20,000 kg was Rs 33,414 and from the 1st of next month, it will now rise to Rs 35,313. The premium for goods-carrying commercial vehicles weighing over 40,000 kg would rise to Rs 44,242 from Rs 41,561 in 2019-20.

Third-party insurance premiums to increase from June 1, 2022

SP Singh, a Senior Fellow at Indian Foundation for Transport Research & Training (IFTRT), said, “Diesel, tyre, toll taxes and all materials costs have increased over the last one year, so there is no surprise on TP rates also going up, and we are not worried. It was expected; the government was doing it from April and now they are doing it from June, that is the only difference. It is justified anyway and a fair decision,”

Meanwhile, Rajesh Menon, Director General, Society of Indian Automobile Manufacturers (SIAM) said, “This steep hike may especially impact demand of mass segments like two-wheelers and smaller cars, which are already struggling to recover owing to huge cost increase in the recent past because of rapid regulatory changes,”

The rise in the cost of the premium has been made after a while as due to the pandemic, these rates were last reviewed in FY20 and left constant. The third-party insurance is required to cover for other than own damage and is mandatory along with the own damage cover that a vehicle owner has to purchase. This cover is for any collateral damage to a third party, generally, a human being caused due to a road accident.