Car Insurance Likely to Get Costlier

Car Insurance Likely to Get Costlier

FPJ BureauUpdated: Friday, May 31, 2019, 05:17 PM IST
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After the announcement of Union Budget 2016–17, it seems car owners have some more to lose. The Insurance Regulatory and Development Authority of India (IRDA) is planning to increase the premium on car insurance as it incurs losses as per the current rate. The high rates are expected to be applicable from April 01, 2016.

The increase in premium comes as part of the annual policy to revise rates. Using such hikes, motor insurance companies hope to revive the sector that’s been reeling under losses. “We need to do a balancing act. The motor insurance portfolio for insurers has been bleeding for many years now. But we can’t place the burden of their losses on policyholders. So we can only gradually increase rates to curb losses,” said an IRDA official who did not wish to be named. “Of course a 30% hike again falls short of what insurance actuaries would want – given the loss ratios are between 80-150% for general insurers in the country. To curb losses, what we need is not higher premiums but regularization. We are pushing for the implementation of the Road Transport & Safety Bill and Motor Insurance Act 1988, so that there is a cap on liability, geography and the time period within which a claim can be filed,” he added.

Passenger vehicles below 1,000cc will be the worst affected

Passenger vehicles below 1,000cc, like the Alto 800, the Eon and Renault’s latest offering the KWID, will be the worst affected. The increase in premium can be as high as 30% for the same. On the other hand, cars having a higher capacity engine (above 1,000cc) are expected to observe 25% increase. A similar trend is applicable for two-wheelers where vehicles with lower engine capacity will have to pay comparatively more than automobiles with higher engine capacity.

Commercial vehicles will also face the brunt of such increase. ET Auto reports that a rise of 25-30% has been proposed for the same. Mr. Puneet Sahni, head of product development for SBI General Insurance Company elaborated and said, “Claims are the highest in the commercial vehicle segment. Trucks between 2-7.5 tonnage usually ply within the state and travel on average as much as 2.5-3 lakh kilometres a year. With trucks between 7.5-12 tonne with a national permit, they could cover as much as 4 lakh kilometres a year – making the risks higher.”

Source: CarDekho

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