Good news! Motor insurance premium may come down from FY20-21
10 Dec 2018
Over the past few months, numerous transporters from all across the country have been continuously demanding that the IRDAI must start fixing the cap for premiums.
As per a recent indication by the Insurance Regulatory and Development Authority of India (IRDAI), the insurance premiums of two-wheelers and four-wheelers may soon come down. All thanks to the latest indication by IRDAI which states that starting from the financial year 2020-21, it may discontinue the regular practice of fixing the annual premium for third party (TP) insurance for motor vehicles. As of now, it is the IRDAI which decides and fixes the premium for third party insurance cover that remains same across all insurers. With IRDAI discontinuing the practice, it will certainly make way for insurance companies to quote their own premiums at discounted rates in order to attract more and more customers.
Over the past few months, numerous transporters from all across the country have been continuously demanding that the IRDAI must start fixing the cap for premiums and even allow the insurers to offer a discount on insurance premiums so that policy seekers have better options. Talking about motor insurance, currently, there is no capping on the “own damage” component and thus most of the insurance companies offer great discounts on the premium amount of “own damage” cover. According to a recent report by the Insurance Information Bureau of India, in the financial year 2016-17 the insurance companies collectively accumulated about Rs 50,000 crore premiums for motor vehicle insurance.
As per the Indian Road Safety Act and Indian Motor Vehicles Act, third party insurance is mandatory for every vehicle running on the Indian roads. Moreover, with the implementation of a new rule, the third- party insurance cover for all new cars has been made mandatory for a period of three years. However, as per several media reports, the matter did come up for discussion with the PMO for meeting the demand of the truckers to roll back the steep increase in premium. In order to support their demand, the truckers even went on a strike. The regulator then assured to bring the hike from 28 per cent to 10 – 15 per cent in the next financial year.
The only reason why the IRDAI is so firm in implementing the indication as soon as possible is that it wants to benefit the customers by reducing the third-party insurance. Once the insurers get the right to decide on the third-party insurance premium, the customers will have more options and they can select the insurer by deciding on the best prices offered.
Most of the car and two-wheeler dealers offer third party and comprehensive motor policy and the premium is generally added to the vehicle purchase price (only in case of new vehicles). However, the prices are relatively higher than the insurance policies being sold online at insurance aggregator’s website. People looking for affordable motor insurance cover are always advised to check for the best available quotes online. While zeroing on a comprehensive motor cover, it is important to make sure if ‘voluntary deductible’ is added by the dealer in the policy or not. By adding the ‘voluntary deductible’ element, you can significantly lower your car insurance premium. Also, by buying car insurance online, you get the option of comparing insurance covers by multiple insurers.
(Disclaimer: These are the author’s views. Readers are advised to consult their financial advisor before buying any plan)