Increase in third-party motor cover premium rates to partially offset underwriting losses for insurers: Report
The last time premiums were increased was in June 2019 and thereafter policyholders were given some respite because of the COVID-19 pandemic.
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The recent hike in the premium rates on third-party motor insurance is unlikely to completely offset the motor insurance segment’s underwriting losses, said Crisil Ratings in a report.
The premium rates for third-party motor insurance have been hiked from June 1.
Premiums for two-wheeler insurance have increased the most — by 12-21 per cent — across engine capacities. For private cars, the maximum hike is 6 per cent.
“The Ministry of Road Transport and Highways’ move to increase the premium on third-party motor insurance after two years is a step in the right direction, but unlikely to fully offset the segment’s underwriting losses,” the rating agency said in the report.
Third-party insurance cover is for other than own damage and is mandatory (as per the Motor Vehicles Act, 1988) to buy along with own damage cover.
“Therefore, any increase in premium helps in reducing losses. So, while this latest increase in premiums will offer a breather, it won’t be enough to stanch the bleeding,” Sitaraman said.
As per the agency, the latest increase, combined with the recovery in automobile sales, is likely to result in a 12-13 per cent growth in third-party motor cover premiums, which account for a fifth of the general insurance industry’s gross written premium.