Motor insurance may cost more as third party premium may be revised.

Insurers are planning to hike Third Party premium by around 50% because of the losses in the third party segment. Of the two segments- third party premium and Own damage premium that make up the motor premium, Third party segment is running into huge losses as a result of heavy claims from commercial vehicles. Under the new regime the insurers are to make provision for thirdparty in their books. It is for this very reason that insurers earlier provided for third party claims from the common pool and not from their own books. This has prompted all insurers to aggressively build-up third party premium in their books especially private sector insurers who earlier would shy away from taking thirdparty premium. Untill recently third party premium was the forte of the public sector insurers.

Two years ago, the rates were raised by 65 per cent and last year, third party motor insurance rates were raised by 20% after vehicle owners opposed the 60 per cent hike that the insurers had demanded. If this hike is approved, then this would be the third hike in last 3 years.

The demand for a hike in the third party motor insurance premium rates by the insurers have risen as a result of the steep raise in the provisioning,  that is the money companies need to set aside for meeting the high claims in this line of business, by Insurance Regulatory and Development Authority.

According to leading insurance companies the losses on account of third party insurance portfolio for insurers is Rs. 8,000-10,000 crores this year. Every April, IRDA revises the third-party premium rates for all class of vehicles based on a formula that takes into account, among other factors, the loss ratios for insurers, inflation and higher claims awards by judiciary. Insurance companies are hoping the regulator will come through with a premium hike that will somehow match with the claims paid out.