THIRD PARTY CAR INSURANCE TO COST MORE.

The premium for third party motor vehicle insurance is set to go up significantly as the government has agreed to do away with the cap on third party liability of insurance companies in case of grievous injuries or deaths in road crashes. The Insurance Regulatory and Development Authority has proposed a nearly fifty percent hike for most categories of vehicles for 2017-18. It is mandatory for vehicles to have third party insurance while insurance for own damage is optional. In comprehensive insurance policies, which have both components, the share of third party insurance is barely thirty percent. IRDA has not proposed increase in third party insurance premium only for a few categories of vehicles such as Maruti Alto, Tata Nano and Datsun Go as well as pick-up vans and mini trucks. But it proposes to increase the premium of cars that have 1,000 to 1500 cc engines by almost fifty percent. Sources said the final hike could be 25-30 percent. It is likely that insurers would push for another round of increase once the Motor Vehicle (Amendment) Bill is passed with the proviso that insurance companies pay the entire compensation awarded by motor vehicle claims tribunal.

There is also a debate on why the government is not deregulating the third party insurance component as it has done in the case of 'own damage cover'. Data with the General Insurance Council show that out of around 19 Crore registered vehicles in India, only 8.26 Crore  had third party insurance cover in 2015-16. Sources said vehicle dealers usually pushed for comprehensive insurance policy at the time of selling a new vehicle as agents get higher commissions in the process. The insurance renewal fee usually falls by fifty percent in the fourth or fifth year once the owners pay back the bank loan. Sources said that if third party insurance is sold separately, it won't pinch vehicle owners and would encourage them to renew policies since it costs only only about thirty percent of the comprehensive vehicle insurance policy.
"Once deregulation of third party insurance happens there will be competition among players. After deregulation of own damage cover, companies are offering huge discounts in that segment", said S.P. Singh of IFTRT, a think-tank on transport issues. [Times of India dated 06th March, 2017].
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