Insurance Rates to increase soon

The 2016 Union Budget has had an effect on every industry and automobile sector wasn’t spared either. The government has decided to increase motor insurance premiums for the upcoming 2016-17 financial year. As per the drafted proposal, IRDA (Insurance Regulatory and Development Authority of India) is likely to increase the rates up to 30%. 

According to an internal document from the IRDA about two-wheelers, there could be a rise of 10-15% for motorcycles having an engine capacity below 350cc like the TVS Star City, the Mahindra Centuro, the Bajaj Discover Series, the Hero Splendor Series and the Hero HF Dawn. On the other hand, a cut of 10% has been offered for two-wheelers whose engine capacity exceeds 350cc such as the Royal Enfield 500cc motorcycles, the Yamaha R3, the Harley Davidson Street and the recently launched Mahindra Mojo. 

A Senior IRDA official said,"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."

He further added, "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."