April 1, 2016: Third-party motor insurance premiums increased

The Insurance Regulatory and Development Authority of India (IRDAI) has announced a hike in third-party insurance premium rates from April 1, 2016.

Rates for cars have increased between 25-40%, and 2-wheelers between 10-25%. The only exception here is bikes with engines larger than 350cc, which see a 10% reduction in their premium.

Cars:

• Less than 1000cc : Rs. 2,055 (40% increase over Rs. 1,468)
• 1000cc to 1,500cc : Rs. 2,237 (40% increase over Rs. 1,598 )
• More than 1,500cc : Rs. 6,164 (25% increase over Rs. 4,931)

2-wheelers:

• Less than 75cc : Rs. 569 (10% increase over Rs. 519)
• 75cc to 150cc : Rs. 619 (15% increase over Rs. 538)
• 150cc to 350cc : Rs. 693 (25% increase over Rs. 554)
• More than 350cc : Rs. 796 (10% decrease from Rs. 884)

The IRDAI uses the following formula for calculation of insurance rates:

P(t)=C1(t)*CII(t-1)+C2(t)

P(t) is the motor third party premium applicable to the financial year 't', CII(t-1) is the Cost Inflation Index for the year 't-1' and C1(t) and C2(t) are parameters applicable to financial year 't' whose values shall be determined and notified by the Authority in each financial year based on the experience measured in terms of average claim amounts, frequency and expenses involved in servicing the motor TP business. The values of the parameters C1(t) and C2(t) may vary according to the class of the vehicle.

The organisation has stated that the cost inflation index has increased by 5.57% over the previous year, i.e. from 1,024 in FY 2014-15 to Rs. 1,081 in FY 2015-16.