Vehicle owners may have to brace for a steep hike in the premium for third party insurance, as the government has agreed to lift the maximum limit on third party liability of insurance companies which applies in cases of grievous injuries or deaths in road crashes. In this regard, the Insurance Regulatory and Development Authority of India (IRDAI) has submitted its proposal, in which, a hike of 50% has been proposed for most types of vehicles for 2017-18. In the current system, third party insurance is mandatory whereas it’s optional for vehicle owners to have insurance for own damage. Many insurance companies sell comprehensive policies that have both components, but in most such policies, the share of third party insurance is only around 30%.
The proposal to increase premium for third party insurance will not apply to certain vehicles such as Tata Nano, Maruti Alto, Datsun Go, pick-up vans and mini trucks. However, remaining cars that have engines with capacity of 1,000-1,500 cc will witness a hike in premium by nearly 50%. It is expected that insurance companies may lobby for another round of increase after the approval of the Motor Vehicle (Amendments) Bill. Such an increase would come with the option that insurers will be able to pay the entire compensation approved by the motor vehicle claims tribunal.